‘Hot money’ fled PH at start of 2020 due to bad news on local, foreign fronts, says BSP

Philippine financial markets saw an exodus of short term investments in the first month of 2020, which the central bank attributed to a slew of adverse economic news both on the international and local fronts, as well as the effects of the ongoing global coronavirus outbreak.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said transactions of registered foreign portfolio investments for January 2020 yielded net outflows of $486 million resulting from the $1.7 billion outflows and $1.2 billion inflows for the month.

This is higher compared to the recorded net outflows in December 2019 of $321 million.

The BSP said these could have been contributed to the outflow—tensions between US and Iran, trade negotiations between US and China, renegotiation of contracts with water concessionaries and “investor concerns” on the spread of COVID-19.

According to the central bank, the $1.2 billion registered investments in January reflected a 10.9 percent increase from the US$1.1 billion figure in December 2019.

About 65.9 percent of investments registered during the month were in Philippine Stock Exchange-listed securities, pertaining mainly to property companies, holding firms, banks, food, beverage and tobacco firms, and telecommunication companies.

The remaining 34.1 percent balance went to investments in peso-denominated government securities.

The United Kingdom, the United States, Singapore, Luxembourg, and Hong Kong were the top five investor countries for the month, with a combined share of 79.0 percent.

Outflows for January 2020 of $1.7 billion were higher compared to the level recorded for December 2019 of $1.4 billion, or by 20 percent.

The US received 62.1 percent of total outflows.

Year-on-year, registered investments were 40.1 percent lower than the $2.1 billion level recorded in January 2019, while gross outflows were higher than the outflows recorded a year ago of $1.3 billion — a decline of 32.5 percent.

In contrast, net inflows of $763 million were recorded for the same period in 2018.

Registration of inbound foreign investments with the BSP is optional under the liberalized rules on foreign exchange transactions.

Registration entitles the investor or his representative to buy foreign exchange from authorized agent banks or subsidiaries and affiliates for repatriation of capital and remittance of earnings.

Unregistered foreign investors can still repatriate capital and remit earnings on investments, but the foreign exchange will have to outside the banking system.

Edited by TSB