Hot money outflow biggest in 8 mths

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Net foreign portfolio investments in the Philippines ended April with their biggest net outflow in eight months, with mounting concerns over the impending local elections, the global oil supply surplus and the slump in Chinese equities prompting many investors to cash out, moving most of the funds to the US market.

Data from the Bangko Sentral ng Pilipinas (BSP) on Friday showed that hot money registered a $354.05-million net outflow in April.

It was the biggest net outflow recorded since the $542 million posted in August 2015.

The April outflow reversed the $482.43 million net inflow registered in March, and stood significantly higher than the $31.14 million net outflow recorded a year earlier.

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Total inflows thinned to $1.273 billion from $1.689 billion the previous month and from $1.934 billion in April 2015.

Total outflows, meanwhile, rose to $1.627 billion from March’s $1.206 billion but dropped from the $1.965 billion posted a year earlier.

Focusing on the month-on-month rise total outflows, the central bank pointed to profit-taking, coupled with concerns about the oil supply surplus; the slump in Chinese equities; and the national elections in the Philippines.

4-mth inflow lower

Cumulative figures for transactions during the first four months yielded a net inflow of $56.26 million, lower than the $1.729 billion net inflow seen in the comparable period last year.
Year-to-date inflows of $4.852 billion offset outflows of $4.796 billion, the BSP said.

Pre-election exit

“A lot of the money that left was in the last two weeks of April as foreign players headed for the exits in the run-up to the elections,” Nicholas Antonio Mapa, associate economist at the Bank of the Philippines Islands (BPI), said.

According to Mapa, selling was noted in both the bond and equity markets as the Philippine Stock Exchange index fell into net foreign selling for the year.

Citing the latest developments, however, Mapa said net selling has since been reversed as the May 9 elections have proved to be rather smooth and free of violence.

Components

Most of the registered inflows, or 80.3 percent, went to Philippine Stock Exchange-listed firms. The funds were used to purchase shares in holding firms, food/beverage/tobacco firms, banks, property developers, and telecommunications companies. Another 19.7 percent went to peso government securities (GS).

PSE-listed securities and peso GS yielded net outflows of $252 million and $103 million, respectively.

The United Kingdom, the United States, Singapore, Luxembourg, and Hong Kong were the top five investor-countries for the month, with a combined share of 78.5 percent.

The US was the main destination of outflows, accounting for 83.2 percent of the total remittances.

Also called hot money because of the ease by which the funds enter and leave the country, foreign portfolio investments are invested in Philippine financial assets and do not necessarily create jobs, unlike foreign direct investments that are put into assets such as factories and equipment.

Hot money yielded a net outflow of $599.70 million last year, exceeding the central bank’s forecast of $200 million.

A larger net outflow of $1.3 billion is expected for 2016 given uncertainties surrounding China, other emerging markets, as well as the next moves of the US Federal Reserve.

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