October inflows fail to stem 10-month ‘hot money’ red tide

MANILA, Philippines–The country experienced a net inflow of short term investments in October, but year-to-date tally for 2019 remained deeply in the red, in contrast to the slightly positive figure recorded for same period, the latest data from the central bank showed.

According to the Bangkok Sentral ng Pilipinas, foreign portfolio investments for October 2019 yielded net inflows of $105 million as a result of the $1.25 billion inflows and $1.15 billion outflows for the month.

This net inflow is a reversal from the net outflows noted in September 2019 of $232 million.

On the whole, however, the country continued to experience a net outflow of this so-called hot money which are assets from fund managers invested over a short term horizon in the local stock, bond and money markets.

From first 10 months of 2019, the central bank recorded a cumulative net outflow of $1.22 billion, compared to a net inflow of $93.89 million for the same period last year.

According to the central bank, this movement of short term investments in October were influenced by domestic and international developments including progress on the US and China trade discussions; initial public offerings by firms in the industrial and services sectors; the BSP’s decision to reduce the reserve requirement ratio for banks by 100 basis points; and the further slowdown of headline inflation to 0.8 percent in October from 0.9 percent in September.

For October alone, the $1.25 billion registered investments reflected a 3.8 percent decrease from the $1.30 billion figure in September.

About 81.9 percent of investments registered during the month were in Philippine Stock Exchange-listed securities pertaining mainly to holding firms, banks, property companies, retail companies, and food, beverage and tobacco companies, while the remaining 18.1 percent balance went to investments in peso-denominated government securities.

The United Kingdom, the United States, Singapore, Luxembourg, and Malaysia were the top five investor countries for the month, with combined share to total at 73.9 percent.

Outflows for October of $1.15 billion were lower compared to the level recorded for September 2019 of $1.53 billion or by 25.1 percent, with the US receiving 74.8 percent of total outflows.

Year-on-year, registered investments were 31.5 percent higher than the $953 million level recorded in October 2018. Similarly, gross outflows were higher than the outflows noted a year ago of $1.02 billion or by 12.5 percent. In contrast, net outflows of $68 million were noted for the same period a year ago.