‘Hot money’ outflow from PH markets in 2020 up 123 percent to $4.2B
MANILA, Philippines—Short term overseas investors removed their money from Philippine markets in 2020 as the COVID-19 pandemic forced the local economy into its steepest contraction in recorded history, data from the central bank showed.
In a press statement, the Bangko Sentral ng Pilipinas (BSP) said registered foreign portfolio investments for 2020 yielded net outflows of $4.2 billion as a result of the $15.9 billion in outflows and $11.7 billion in inflows for the year.
The net outflows for last year represented a 123-percent increase from the $1.9 billion that left local financial markets in 2019.
“Developments for the year included the ongoing impact of the COVID-19 pandemic to the global economy and financial system, along with international and domestic developments throughout the year such as geopolitical tensions, certain corporate governance issues and extended community quarantine measures in various regions in the country,” the BSP said.
The repatriation of funds was attributed to foreign investors pulling their so-called hot money out of Philippine Stock Exchange-listed shares to the tune of $3.3 billion; peso-denominated government securities worth the equivalent of $931 million; and other portfolio instruments with a total of $22 million.
According to the BSP, foreign portfolio investments registered with it last year had a total of $11.7 billion, reflecting a 29.7 percent decrease — or by $4.9 billion — compared to the $16.6 billion level in 2019.
These portfolio funds were predominantly investments in PSE-listed securities, accounting for 80.5 percent of total, mostly in property companies, holding firms, banks, food, beverage and tobacco firms and information technology companies.
The balance of 19.5 percent was invested in peso-denominated government bills and bonds. The United Kingdom, Singapore, United States, Luxembourg and Hong Kong were the top five investor countries during the year, with combined share of a total of 78.2 percent.
Outflows recorded by the regulator, worth $15.9 billion in 2020, were also lower compared to previous year’s $18.5 billion, representing a decline of 14 percent or $2.6 billion. The bulk of these outflows — 96.9 percent — represented capital repatriation while the remaining 3.1 percent pertained to remittance of earnings.
The US continued to be the main destination of outflows with 63.8 percent of total.
The BSP said that the registration of inward foreign investments is optional under liberalized rules on foreign exchange transactions. Registering inward portfolio investments entitle the investor to buy foreign exchange from the formal banking system for repatriation of capital and remittance of earnings that accrue on the registered investment. Without this, a foreign investor can still repatriate capital and remit earnings on his investment but the foreign exchange will have to come from outside the banking system.
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