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‘Hot money’ outflows dive to 14-month low


Foreign portfolio investments that left the country sank to its lowest in 14 months in August on lingering uncertainties over the coronavirus disease 2019 (Covid-19) pandemic, according to the Bangko Sentral ng Pilipinas (BSP).

Data from the central bank showed on Friday that net outflows of these investments, or
“hot money” — so named because of how easily these enter and exit the economy — shrank to $126.76 million last month, the smallest since the $36.03 million in June 2019.

These were also lower than July’s $453.17-million outflows and the $391.74 million that left the country in August last year.


The latest amount resulted from inflows of $666.51 million and outflows of $793.27 million.

In a statement, the BSP said the $666.51-million registered investments for the month were a 7.3-percent reduction from the $719.11 million in July.

The bulk, or 84.3 percent, of these investments were placed in Philippine Stock Exchange (PSE)-listed securities, mainly holding firms; property companies; banks; food, beverage and tobacco companies; and telecommunication firms. The rest, in government securities.

The United Kingdom, Singapore, United States, Hong Kong and Luxembourg were the top foreign investors last month. Their investments make up 82.6 percent of the total.

The $793.27-million outflows were 32.3 percent smaller than July’s $1.17 billion. The US remained the main destination of the repatriated funds, accounting for 71.5 percent.

Hot money stayed in the negative territory in the first eight months of the year, with net outflows at $3.88 billion, 254.18 percent wider than the year-ago figure.

The BSP said the year-to-date net outflows were “brought about by uncertainties due, among others, to the impact of the Covid-19 pandemic [on] the global economy and financial system.”

It also blamed the outflows on geopolitical and trade tensions, and corporate governance issues involving water concessionaires Manila Water Co. Inc. and Maynilad Water Services Inc.

The Bangko Sentral expects net hot money inflows of $2.4 billion this year.

Commenting on the data, Rizal Commercial Banking Corp. chief economist Michael Ricafort traced the smaller August net outflows to the continued gains in the local bond markets as yields posted new record lows in the month.

He also noted the record-high offering of five-year retail Treasury bonds (RTBs) of the government, which raised P516.3 billion and were settled on August 12.

Ricafort also highlighted huge fundraising activities, especially debt issuances by the biggest companies in the country amid record-low interest rates.

“The record RTB issuance and various corporate bond issuances/fundraising activities may have entailed some foreign buyers/investments, [and this] may have helped in improving the latest available net foreign portfolio investments data,” he said.

In the coming months, the RCBC economist added, the further reopening of the economy and sustained pick-up in economic recovery would fundamentally help improve investment valuations and, in turn, the net foreign portfolio investments data.


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