‘Hot money’ reversed to net outflow from PH in first five months

More ‘hot money’ left the Philippines in the first five months of the year, reversing the net inflows reported in the same period last year—a phenomenon which the central bank attributed to outflows in all forms of short-term securities in local financial markets.

Data from the Bangko Sentral ng Pilipinas showed that portfolio investments recorded a net outflow of $685.3 million from January to May.

This was in stark contrast to the net inflows of $813.8 million tallied in the same period last year.

Portfolio investments are short term fund flows from overseas into the country’s stock, bond or money markets and, in contrast to longer-term foreign direct investments, can quickly move in or out of the local financial system depending on the sentiment of fund managers.

For May alone, the central bank said BSP-registered foreign portfolio investment transactions yielded net outflows of $750 million, resulting from gross outflows of $2 billion and gross inflows of $1.2 billion.

By instrument, all investment instruments resulted in net outflows: listed securities at the Philippines Stock Exchange ($508 million), peso-denominated government securities ($241 million), and other peso-denominated debt instruments or portfolio instruments (each at less than $1 million).

Gross inflows rose 25 percent from the $990 million last month.

“This may be attributed to investor reaction to lower inflation for April 2019 amid the holding of the country’s midterm elections and the BSP’s announcement to cut the reserve requirements ratio of universal and commercial banks,” the central bank statement said.

About 81.5 percent of investments registered during the month were in PSE-listed securities (pertaining mainly to holding firms, property companies, banks, food, beverage and tobacco companies and transportation services firms); while the remaining 18.5 percent went to peso-denominated government securities.

The United Kingdom, the United States, Malaysia, Singapore and Luxembourg were the top five investor countries for the month, with combined share to total at 76.7 percent.

Gross outflows for May 2019 ($2 billion) were higher by 54.2 percent than the April 2019 level ($1.3 billion) as investors reacted to the renewed trade tensions between the US and China. The US continued to be the main destination of outflows, receiving 81.5 percent of total remittances.

Year-on-year, a 2.1-percent increase in gross inflows was noted from the $1.2 billion inflows recorded during the same month a year ago; gross outflows also increased by 40.1 percent from its $1.4 billion in May 2018.