Trade war fears, weak PH economy early on drive $391M in ‘hot money’ away

Short term investments fled local financial markets in August resulting in more than $300 million leaving the Philippines in the first eight months of 2019, which the central bank attributed to fears of a US-China trade war and the lackluster performance of the Philippine economy in the first half of the year.

According to data from the Bangko Sentral ng Pilipinas (BSP), the economy lost $391.7 million in net outflow of so-called hot money in August from only $225.8 million during the same period in 2018.

Net portfolio outflow for the first eight months of 2019 reached $1.1 billion, marking a sharp contrast to the $602-million net inflow recorded during in January to August 2018.

A closer examination of the numbers showed that BSP-registered investments in August amounted to $1.2 billion, reflecting a 27.8 percent decline from $1.7 billion in July.

About 75.7 percent of investments registered in August were in Philippine Stock Exchange-listed securities pertaining mainly to property companies, holding firms, banks, food, beverage and tobacco companies, and transportation firms; while 24.3 percent went to investments in peso-denominated government securities.

The United Kingdom, Singapore, the United States, Malaysia, and Hong Kong were the top five investor countries for August with combined share total at 73.9 percent.

Overall transactions for August 2019 yielded net outflow of $392 million, in contrast to the net inflow of $15 million recorded in July.

Aside from the trade war and weak Philippine economy early in 2019, the BSP said heightened pro-democracy protests in Hong Kong added to the jitters.