Spooked ‘hot money’ investors fled PH in first quarter, BSP data show

Short term investments in Philippine financial markets fled the country at the end of the first quarter of 2020 as the coronavirus pandemic dampened sentiment among money managers around the world, the latest data from the central bank showed.

According to the Bangko Sentral ng Pilipinas (BSP), the tally of so-called “hot money” movements yielded net outflows of $1.5 billion from the start of the year until the first week of April.

This was the result of $5.2 billion in gross outflows which swamped the $3.7 billion in gross inflows for this period.

“This is a reversal from the $293 million net inflows noted for the same period last year brought about by uncertainties due, among others, to the impact of the COVID-19 pandemic on the global economy and financial system,” the central bank said.

It added that other contributing factors to the surge in portfolio investment repatriations by fund managers included the continuing geopolitical tensions between the US and Iran; the ongoing trade negotiations between the US and China; and the renegotiation of the contracts of the country’s water concessionaires.

“Meanwhile, year-to-date transactions for all investments — Philippine Stock Exchange-listed securities, peso-denominated government securities and other investments — resulted in net outflows,” the regulator added.

While hot money flows have limited direct impact on the real economy, it is a leading indicator of the sentiment of financial investors on the prospects of the country which, in turn, helps determine the viability of long-term investments.

According to the central bank, foreign portfolio investments for March 2020 yielded net outflows of $961 million, resulting from the $1.9 billion outflows and $954 million inflows for the month.

This marked a reversal from the recorded net inflows of $40 million in February. The $954 million registered investments reflected a 30.6-percent decline from the $1.4 billion figure in February 2020.

The central bank data showed that 93 percent of investments registered during the month went to PSE-listed securities — mainly in property companies, holding firms, banks, food, beverage and tobacco companies and transportation services firms — while the remaining 7 percent went to investments in peso-denominated government securities.

The United Kingdom, the United States, Singapore, Hong Kong and Luxembourg were the top five investor countries for the month, with combined share to total at 83.9 percent.

Outflows for the month of $1.9 billion were higher by 43.5 percent compared to the $1.3 billion recorded for February.

“This may be attributed to the general risk off sentiment in the market that has prompted investors to liquidate portfolios and keep money in cash amid heightened worries over adverse economic impact of the coronavirus pandemic and despite the initial fiscal stimulus package of the government,” the central bank said, adding that the US received 68.5 percent of total outflows.

Edited by TSB