More ‘hot money’ leaving Philippine markets

Short term investments were leaving the Philippines in 2019 quicker than they did in 2018, resulting in more so-called hot money going out in 2019, a reverse of 2018’s record of hot money inflow.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that portfolio investments recorded a net outflow of $685.3 million from January to May in 2019 in stark contrast to the net inflow of $813.8 million tallied in the same period in 2018.

The BSP attributed this to the outflow of all forms of short-term securities from local financial markets.

Portfolio investments are like gambling bets placed on stocks, bonds or money markets that normally don’t stay and move in and out of the local financial system depending on profit margins or losses.

They are in contrast to long-term foreign investments which are normally put on new or expanding factories, offices and other businesses that create jobs.

In May 2019 alone, BSP data showed that a net of at least $750 million in foreign portfolio investments left the Philippines.

Money placed in all Philippine investment instruments had net outflow—$508 million in listed securities at the Philippine Stock Exchange (PSE), $241 million in peso-denominated government securities and less than $1 million each in other peso-denominated debt instruments or portfolio instruments.

But gross inflow rose by 25 percent from $990 million in May 2019.

In a statement, the BSP attributed this to three factors—lower inflation in April 2019, the midterm elections and a move to cut the reserve requirement, or cash in hand, of commercial banks.

At least 8 out of every 10 investments in May 2019 went to PSE-listed securities while the rest were plunked into peso-denominated securities.

At least 75.7 percent of all investments in the Philippines in May 2019 were from the United Kingdom, the United States, Malaysia, Singapore, and Luxembourg. China was notably not on the top despite halleluiahs sang by President Rodrigo Duterte about how China is a good friend.

Trade war tension between the United States and China was seen as the driving factor for a gross investment outllow of $2 billion in May 2019. At least 81.5 percent of the money that left was headed to the United States. (Editor: Tony Bergonia)