‘Hot money’ swings back into the red as pandemic woes linger

More short term investments from overseas were liquidated from the Philippines’ financial markets and repatriated to their home countries than came in last February due to lingering concerns about the economic impact of the coronavirus pandemic, according to the central bank.

In a statement, the Bangko Sentral ng Pilipinas said foreign portfolio investments for the second month of 2021 yielded net outflow of $40 million resulting from the $1.38 billion gross outflows and $1.34 billion gross inflows for the month.

This is a reversal from the net inflows of $98 million recorded in January 2021.

The $1.34 billion registered investments for February reflected a 40.6-percent increase compared to the $952 million recorded in January 2021 or by $386 million.

A total of 39.8 percent of investments registered were in Philippine Stock Exchange-listed securities, pertaining mainly to banks, property companies, holding firms, food, beverage and tobacco companies and telecommunication services firms, while the remaining 60.2 percent went to investments in peso-denominated government securities.

The United Kingdom, Singapore, United States, Malaysia and Hong Kong were the top five investor countries for the month, with combined share of 83.1 percent.

These so-called hot money movements refer to foreign investments in PSE-listed securities; peso-denominated government securities; peso-denominated time deposits with banks with minimum tenor of 90 days; other peso debt instruments; unit investment trust funds; and other portfolio investments such as exchange traded funds and Philippine depositary receipts.

Gross outflows for the month of $1.38 billion were larger compared to the level recorded for January 2021 of $854 million by 61.5 percent or by $525 million. The United States received 64.2 percent of total outflows.

“Developments for the month included, among others, investor reaction to local manufacturing data for January 2021; the ratification of the Corporate Recovery and Tax Incentives for Enterprises law; the signing of the Financial Institutions Strategic Transfer Act; the anticipation of the arrival of vaccines against COVID-19 in the Philippines; and the BSP’s decision to maintain policy rates,” the central bank said.

Year-on-year, registered investments were 2.7 percent lower than the $1.37 billion recorded in February 2020.

Gross outflows were higher than the outflows recorded a year ago of $1.33 billion or by 3.3 percent. Furthermore, the $40 million net outflows is a reversal of the $40 million net inflows recorded for the same period a year ago.

The registration of inward foreign investments with the BSP 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. INQ