‘Hot money’ flows out of PH on mining issue

Investors pulled out more so-called hot money from the country during the first three weeks of February amid uncertainty in the mining sector following the Department of Environment and Natural Resources’ order to suspend or close down a number of mines.

Bangko Sentral ng Pilipinas data showed that from Feb. 1 to 17, the country recorded foreign portfolio investment inflows of $635.1 million.

However, portfolio investment outflows during the same period were higher, at $960.77 million.

As such, the first three weeks of February yielded a net outflow of hot money worth $325.67 million.

The net outflow from Feb. 1 to 17 wiped out the $301.33-million net inflow registered in January, resulting in a year-to-date net outflow of $24.34 million.

An economist said the higher outflows were “basically predicated on the mining closure with several mining firms shuttered by the Environment Secretary,” referring to Regina Paz Lopez, who in February ordered the closure of 23 mines as well as the suspension of five others.

A week later, Lopez also ordered the cancellation of 75 mineral production sharing agreements entered into by the government.

“As the fate of the mining community remains in limbo, foreign investors opted to dump their shares in the sector,” the economist said, noting that the Philippine Stock Exchange was one of only two Asian equity markets that were down last month.

The net inflow posted in January was attributed by the BSP to optimism among investors amid sustained robust economic growth, as it was that month when the government announced that the gross domestic product expanded by 6.8 percent in 2016.

For 2017, the BSP had projected portfolio investments to yield a net outflow of $900 million by yearend.

Foreign portfolio investments are in the form of placements in publicly listed shares, government and private sector IOUs, and deposit certificates.

Portfolio investments are considered short-term bets—hence the nickname hot money—because these placements may be pulled out quickly.