‘Hot money’ outflow eased in Oct

Short-term portfolio investments continued to flow out of the country’s financial markets in October—albeit at a slower pace than those recorded in the previous month and during the same period last year—as high inflation continued to impact on the attractiveness of local yields.

At the same time, the Bangko Sentral ng Pilipinas said foreign fund managers continued to pull out their so-called “hot money” from local investments due to the rising trade tensions between the United States and China, which could affect the Philippine economy.

According to the latest central bank data, overall transactions for October resulted in a net outflow of $68 million, which represented an improvement over the $440 million and $563 million in net outflows recorded in September 2018 and October 2017, respectively.

Total outflow for the month ($1 billion) was lower compared to that recorded for September 2018 ($1.2 billion or by 13.8 percent) and October 2017 ($1.9 billion or by 47.6 percent).

“The United States continued to be the main destination of outflows, receiving 77.7 percent of total remittances,” the central bank said.

Nonetheless, year-to-date transactions yielded a net inflow of $94 million compared to the $812 million in net outflow for the same period last year, which was attributed to a large investment in the recent equity issue of San Miguel Food and Beverage Inc., the bulk of which was bought by foreign fund managers.

Registered investments for October hit $953 million, up 28.2 percent from the $743 million in September. In contrast, this represented a 31.2-percent decline from the $1.4 billion level recorded during the same month a year ago.

Some 68.8 percent of investments registered during the month were in Philippine Stock Exchange-listed securities (holding firms, food, beverage and tobacco firms, banks, property companies and telecommunication companies).

The balance went mostly to peso government securities (31.2 percent) and peso time deposits (less than $1 million). Transactions in both of these instrument classes yielded net inflows of $233 million and less than $1 million, respectively, while net outflows were noted for transactions in PSE-listed securities ($301 million) and other peso debt instruments (less than $1 million).

The United Kingdom, United States, Singapore, Norway and Luxembourg were the top five investor countries for the month with a combined share to the total of 82.4 percent.

Registration of inward foreign investments with the 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 come from outside the banking system.