Hot money outflow swells to 32-month high in May

MANILA, Philippines — Foreign portfolio investments exited the Philippines for the third straight month in May, with net outflow hitting a 32-month high of $749.84 million, almost four times the net outflow of $206.35 million in the same month last year, the Bangko Sentral ng Pilipinas said.

Securities at the Philippines Stock Exchange (PSE), peso government securities and other peso debt instruments, and other portfolio instruments yielded net outflows due to heightened trade tension between the US and China, the BSP said.

Foreign portfolio investments are also called hot or speculative money because of their  flighty nature. The May figure was the highest level since hitting a net outfow of $807.15 million in September 2016.

According to BSP data, inflows inched up by two percent to $1.24 billion in May from $1.21 billion in the same month last year and 25 percent higher than the $989.9 million recorded in April.

Of the total inflows, the BSP said about 81.5 percent of investments were in PSE-listed securities, while the 18.5 percent balance went to peso government securities.

About 76.7 percent of the total inflows came from the United Kingdom, US, Malaysia, Singapore, and Luxembourg.

“This may be attributed to investor reaction to lower inflation for April 2019 amid the holding of the country’s midterm elections and the BSP’s announcement to cut the reserve requirements ratio of universal and commercial banks,” the central bank said referring to the increase in inflows in May from April.

On the other hand, gross outflows jumped by 40.1 percent to $1.99 billion in May from $1.42 billion in the same month last year and 54.3 percent higher than the $1.29 billion recorded in April as investors reacted to the renewed trade tensions between the US and China.

Data showed PSE-listed securities yielded the biggest net outflow of $508 million followed by peso government securities with $241 million as well as other peso debt instruments and other portfolio instruments with less than $1 million each.

For the first five months, foreign portfolio investments yielded a net outflow of $685.27 million, reversing the net inflow of $813.81 million.

Gross inflows slipped by 4.2 percent to $7.43 billion from January to May compared to $7.76 billion in the same period last year, while gross outflows went up by 16.9 percent to $8.12 billion from $6.94 billion.

Based on its latest assessment, the BSP now expects a net inflow of foreign portfolio investments amounting to $4 billion instead of a net outflow of $200 million this year.

The Philippines booked a net outflow of foreign portfolio investments amounting to $205.03 million last year, reversing the net inflow of $404.43 million in 2017 as inflation overshot the BSP’s two to four percent target while trade tension between the US and China continued to escalate.

The BSP raised interest rates by 175 basis points as inflation shot up to 5.2 percent last year from 2.9 percent in 2017 due to elevated oil and food prices as well as weak peso.

The central bank, however, slashed interest rates by 25 basis points last May 9 as inflation eased to an average of 3.6 percent in the first five months despite the slight uptick to 3.2 percent in May from three percent in April.