‘Hot money’ fled PH in droves in May; monthly inflows fell to weakest in over 10 years

MANILA, Philippines — So-called hot money investors fled from Philippine financial markets in droves during the peak of the lockdown imposed by the government to fight the coronavirus pandemic, aggravating already bad portfolio investment numbers since the start of the year, according to the central bank.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said registered foreign portfolio investments for May 2020 yielded net outflows of $1 billion, resulting from the $1.5 billion gross outflows and $486 million gross inflows for the month.

This was larger than the recorded net outflows of $660 million in April.

The $486 million registered investments for May reflected a 22.4-percent decline from the $627 million figure in April 2020 and is also the lowest recorded monthly gross inflows since November 2009.

About 88.3 percent of investments registered were in Philippine Stock Exchange-listed securities pertaining mainly to property companies, holding firms, banks, retail companies, and telecommunication firms.

The remaining 11.8 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 88.1 percent.

Outflows for May of $1.5 billion were higher compared to the level recorded for April of $1.3 billion, or by 15.9 percent, with the US receiving 47.5 percent of total outflows.

Year-to-date, foreign portfolio investment transactions yielded net outflows of $3.1 billion resulting from the $7.8 billion gross outflows and $4.7 billion gross inflows for the said period.

This is larger compared to the $685 million in net outflows noted for the same period last year brought about by uncertainties due to, among others, the impact of the COVID-19 pandemic on the global economy and financial system.

Other contributing factors earlier in the year included the continuing geopolitical tensions between the US and Iran; 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 — PSE-listed securities, peso-denominated government bonds, and other investments — resulted in net outflows.

According to the central bank’s policies, the registration of inward foreign investments with regulators is optional under the liberalized rules on foreign exchange transactions. The issuance of a BSP registration document entitles the investor or his representative to buy foreign exchange from authorized agent banks or their subsidiary or affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment. Without such registration, the foreign investor can still repatriate capital and remit earnings on his investment but the foreign exchange will have to be sourced outside the banking system.