‘Hot money’ fled PH in Jan due to bad news, says BSP

Philippine financial markets saw an exodus of short-term investments in the first month of the year, 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.

“Developments for the month included continuing geopolitical tensions between the United States and Iran, ongoing trade negotiations between the United States and China, renegotiation of the contracts of the country’s water concessionaires, and investor concerns on the spread of the COVID-19 originating from Wuhan, China,” the BSP said.

According to the BSP, the $1.2 billion registered investments in January reflected a 10.9-percent increase from the $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 went to investments in peso-denominated government securities.

The United Kingdom, United States, Singapore, Luxembourg and Hong Kong were the top five investor countries for the month, with a combined share of 79 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 United States 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 a year ago.

Registration of inward 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 their subsidiary/affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment. Unregistered foreign investors can still repatriate capital and remit earnings on investments, but the foreign exchange will have to be sourced outside the banking system.