Net $409M hot money exits PH in Feb


FOREIGN portfolio investment of $409.01 million in net amount flowed out of the Philippines in February this year, the central bank said on Thursday.

Driving the hot money out were factors such as the closure of mining companies in the country while inflows from the US dwindled due to the new administration’s trade and immigration policies, the Bangko Sentral ng Pilipinas (BSP) said.

A private analyst said economic and tax reforms could still support positive investor sentiment, although he cautioned that rising domestic political risks could also dampen investment appetite.

The net outflow of portfolio investment in February 2017 reversed a net inflow of $57.74 million recorded in February 2016, as well a $301.33-million net inflow in January, official data showed.

The BSP said total outflows reached $1.390 billion in February, far exceeding total inflows of $981.20 million during the month.

For the first two months of the year, hot money registered a net outflow of $168.41, widening from the $60.89 net outflow posted a year earlier.

Trump policies, DENR moves

Focusing on month-on-month inflows, the BSP said registered foreign portfolio investments for the month amounted to $981 million, reflecting a 14.5 percent decline from the $1.1 billion in January 2017.

It said among the developments in the domestic and international fronts that weighed on investor sentiment were concerns over trade and immigration policies under the Trump administration.

The central bank also noted that the decline in registered investments in February could also be traced to the Department of Environment and Natural Resources’ closure order for 25 mining companies all over the country.
“Year-on-year, an 8.2 percent decrease in inflows was also noted, compared with the $1.1 billion figure recorded last year,” it added.

The BSP reported that outflows for February rose by 64.4 percent from $846 million in January due to profit-taking and withdrawals from investments in peso government securities.

Year-on-year, outflows rose by 37.5 percent from the $1.0 billion level in 2016, it said.

About 91.3 percent of investments registered during the second month were in Philippine Stock Exchange-listed securities, pertaining to mainly banks, holding firms, property companies, food, beverage and tobacco firms, and utilities companies); while the 8.7 percent balance went to peso government securities.

The United Kingdom, United States, Malaysia, Hong Kong, and Norway were the top five investor countries for the month, with combined share to total of 71.1 percent. The United States continued to be the main destination of outflows, receiving 85.0 percent of total remittances.

Foreign portfolio investments are also known as hot money because of the ease with which the funds move in and out of a country and do not necessarily create jobs, unlike foreign direct investments, which are used to build factories and buy capital equipment.

Reforms, politics

Senior economist Joey Cuyegkeng of the ING Bank Manila said if the current administration pushes hard for economic reforms, and in the immediate term, the tax reform package, investors would have a better outlook for corporate earnings.

“But macro-economic fundamentals remain a concern—specifically the peso weakness, on the view that the Philippines may be back to a twin-deficit situation. Rising interest rates and the extent of the rise in financing cost are also a concern,” he said.

Talk of destabilization in the government and conflicting signals do not help market sentiment, he added.


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