Hot money reverses to net outflow in H1

MANILA, Philippines — More foreign capital exited the Philippines in the first half, reaching $720.98 million or a reversal of the net inflow of $322.87 million in the same period last year, according to the Bangko Sentral ng Pilipinas.

Based on central bank data, gross inflows went up by only 2.4 percent to $8.84 billion from January to June from $8.64 billion in the same period last year.

On the other hand, gross outflows went up by 15 percent to $9.56 billion in the first half from $8.31 billion a year ago.

Foreign portfolio investments are called hot or speculative money because of their flighty nature.

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

The Philippines has been booking net foreign portfolio investment outflows since March.

However, the outflows declined in June due to easing inflation and the resumption of trade talks between the US and China.

For June alone, the central bank said the country incurred a net outflow of $35.72 million, 93 percent lower than the $516.12 million net outflow recorded in the same month last year.

“Nevertheless, the net outflows for June is an improvement from the net outflows noted in May 2019 amid domestic inflation data for May 2019 which is within the government’s target of two to four percent, the resumption of trade talks between the US and China during the recently held G20 meeting in Japan and the anticipated possible interest rate cuts of the US Fed,” the BSP said.

About 73.6 percent of investments registered last month went to companies listed at the Philippine Stock Exchange (PSE) particularly property developers, holding firms, banks, food, beverage and tobacco companies and telecommunication firms.

On the other hand, about 26.4 percent balance went to peso government securities.

Foreign portfolio investments came mainly from the United Kingdom, Malaysia, Singapore, the US and Hong Kong with a share of 82.2 percent.

By instrument, the central bank said transactions in peso government securities yielded net inflows of $104 million, while net outflows may be noted for transactions in PSE-listed securities with $139 million.

The Philippines recorded 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.