PH saw $312-M net outflow of ‘hot money’ in April

Bangko Sentral ng Pilipinas (File photo / Philippine Daily Inquirer)

Flighty foreign funds posted a bigger outflow in April compared to the previous month, reflecting heavy foreign selling in the local stock market amid geopolitical risks and diverging rate outlook in the United States.

Data from the Bangko Sentral ng Pilipinas (BSP) showed foreign portfolio investments (FPI) recorded net outflows of $312 million. This was larger than the $236-million net outflow registered in March.

Also known as “hot money” because of their tendency to leave at the first sign of trouble, FPIs are highly sensitive to developments onshore and offshore unlike firmer commitments such as foreign direct investments, which tend to stay longer and can generate jobs for Filipinos.

A net outflow means more of these short-term foreign funds left the economy against those that entered during a period, while a net inflow means the reverse happened.

Despite the net outflows in April, figures showed the four-month hot money tally still yielded net inflows of $65 million, a turnaround from the $680-million net outflows noted a year ago.

Foreign selling

Dissecting the BSP’s report, gross hot money outflows in April amounted to $1.2 billion, down by 25.4 percent. The United States, considered a safe haven by investors, received 43 percent of the total funds that exited.

That exodus mainly reflected losses in the Philippine Stock Exchange, after the main index shed 2.9 percent month-on-month in April.

Foreign transactions

Data showed foreign transactions in the local equities market yielded a net outflow of P23.6 billion in April, significantly higher than the P3.2-billion net foreign selling in March. Analysts said tensions in the Middle East and the possibility of a delayed rate cut in the United States continued to cause capital flight to safety.

Those outflows eclipsed the $914-million gross hot money inflows in April, which was lower by 35.1 percent. The BSP said 59.5 percent of these FPIs that entered the economy were invested in publicly listed companies, mostly in banks and holding firms. The remaining 40.5 percent were short-term bets placed on government securities like Treasury bills and Treasury bonds.

Investments for the month mostly came from the United States, the United Kingdom, Singapore, Luxembourg, and Hong Kong with an 87.9-percent combined share to total inflows. INQ