Foreign ‘hot money’ continued exit from PH markets amid pandemic jitters

MANILA, Philippines—More short term funds from overseas investors left Philippine financial markets than entered it in March, further widening the hot money deficit since the start of 2021, as worries about the COVID-19 pandemic continued to weigh on fund managers, according to the Bangko Sentral ng Pilipinas (BSP).

At the same time, however, BSP data showed that the net outflows for the first three months of 2021 amounted to only slightly less than a third of the amount that fled the country’s stock, bond and money markets during the same period in 2020.

According to the regulator, registered foreign portfolio investments for March 2021 yielded net outflows of $541 million resulting from the $1.37 billion gross outflows and $824 million gross inflows for the month. This was larger compared to the net outflows of $40 million recorded in February 2021.

The $824 million registered investments for March reflected a 38.4 percent decline compared to the $1.34 billion recorded in February 2021 or by $514 million.

About 90.5 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 transportation services firm.

The remaining 9.5 percent went to investments in peso-denominated government securities. The United Kingdom, the United States, Luxembourg, Switzerland and Hong Kong were the top five investor countries for the month, with combined share to total at 78.7 percent.

Gross outflows for the month of $1.37 billion were lower compared to the level recorded for February 2021 of $1.38 billion by 1.0 percent, or by $13 million. The US received 61.6 percent of total outflows.

“Developments during the month included investor reaction to rising inflation and vaccine rollout amid the surge in virus infection and reimposition of restrictions on mobility in the National Capital Region and nearby provinces,” the BSP said.

Year-on-year, registered investments declined by 13.6 percent from the $954 million recorded in March 2020. Gross outflows were lower than the outflows recorded a year ago of $1.9 billion or by 28.7 percent. Further, the $541 million net outflows is likewise lower compared to the $961 million net outflows or by 43.7 percent recorded for the same period in 2019.

Transactions for BSP-registered portfolio investments from Jan. 1 to Mar. 31, 2021 yielded net outflows of $483 million.

This was lower compared to the $1.4 billion net outflows recorded for the same period in 2021 amid the ongoing impact of the COVID-19 pandemic on the global economy and financial system.

This has been accompanied by international and domestic developments such as the new US administration, vaccine rollout and the reimposition of additional quarantine measures amid the surge in virus infection.

Year-to-date transactions for investments in PSE-listed securities and other investment instruments resulted in net outflows, while those for peso-denominated government securities yielded net inflows.

TSB