Hot money resumes outflow in May

Hot money investments resumed their outflow in May after a two-month respite, but the year-to-date tally of these short-term fund flows remained positive, the Bangko Sentral ng Pilipinas said on Thursday.

In a statement, the central bank said that registered foreign portfolio investments during May 2018 amounted to $1.2 billion, down by 11.9 percent and 18.4 percent from figures recorded the previous month and a year ago, respectively.

“This may be attributed to higher US Treasury yields and investor concerns on a weaker peso and rising oil prices which may affect inflation,” the BSP said.

The United Kingdom, US, Singapore, Malaysia, and Hong Kong were the top five investor countries for the month, with combined share to total at 74.8 percent. About 80.2 percent of investments registered during May 2018 were in Philippine Stock Exchange-listed securities (pertaining mainly to banks, holding firms, property companies, food, beverage and tobacco firms, and transportation services companies), while the balance went to peso government securities.

Net inflows of $74 million were noted for peso government securities, while net outflows were recorded for PSE-listed securities and other peso debt instruments.

Outflows for the month of US$1.4 billion were 29.3 percent higher compared to the $1.1 billion level in April due mainly to investors’ reaction to renewed geopolitical tension between the US and China coupled with the continuous net foreign selling of PSE-listed securities since February of this year.

The opposite was noted year-on-year, as outflows declined by 6 percent from $1.5 billion in May 2017. The US continued to be the main destination of outflows, receiving 77.4 percent of total remittances.

On the overall, transactions for the month resulted in net outflows of $206 million. This is a reversal from the $279 million net inflows recorded last month. Year-on-year, the figure is higher than the $24 million net outflows recorded for May 2017.

Registration of inward foreign investments with the Bangko Sentral ng Pilipinas (BSP) is optional under the liberalized rules on foreign exchange transactions. The issuance of a BSP registration document entitles the investor or his representative to buy foreign exchange from authorized agent banks and/or their subsidiary/affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment. Without such registration, the foreign investor can still repatriate capital and remit earnings on his investment but the foreign exchange will have to be sourced outside the banking system.