Expected policy continuity at BSP under Espenilla generates net inflow of hot money

Nestor Espenilla Jr. —RICHARD A. REYES

More hot money came in during the week that the Duterte administration named a ranking Bangko Sentral ng Pilipinas official to succeed outgoing Governor Amando M. Tetangco Jr., signaling continuity in monetary policy.

READ: Espenilla next BSP chief

On May 8-12, inflows of foreign portfolio investment worth $354.41 million exceeded the $292.01 million in outflows, resulting in a net inflow of $62.4 million to halt three straight weeks of net outflows.

The hot money inflows that week were higher than the previous week’s $253.97 million, while the outflows were lower than the $382.23 million on May 1-5.

An economist said the net inflow of hot money was partly a result of President Rodrigo Duterte naming an insider to take over the top BSP post when Tetangco steps down on July 2.

Incoming BSP Gov. Nestor Espenilla had said the next six years under his watch will see “continuity plus plus” at the BSP.

For London-based economic research firm Capital Economics, “we don’t think a changing of the guard [at the BSP] will alter the outlook for monetary policy.”

“Having been deputy governor since 2005, Espenilla represents continuity,” Capital Economics said in a research note last week.

It was also during the week of May 8-12 that the result of the French presidential election saw pro-European Union Emmanuel Macron triumph over EU skeptic Marine Le Pen, the economist noted.

Also, there were “some follow through additional foreign flows also emanating from the Commission on Appointments’ decision to deny [former Environment Secretary] Gina Lopez her post on May 4,” the economist added.

Hot money outflows in February and March were mostly blamed on Lopez’s orders to close down 23 mine operations, suspend five others, as well as cancel 75 mineral production sharing agreements, which the mining industry alleged did not undergo due process.

From January 2 to May 12, the $5.431 billion in portfolio investment inflows were less than the $6.013-billion outflows, resulting in a year-to-date net outflow of $581.9 million.

For 2017, the BSP had projected portfolio investment 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. JPV