Hot money flees Philippines for second straight month

Hot money flees Philippines for second straight month

Short-term portfolio investments left the Philippines for a second straight month in April amid cautious investor sentiment due to the stricter lockdown measures to curb a spike in coronavirus infections.  

Hot money – dubbed as such due to the ease by which these funds enter or leave an economy – posted a net outflow of $373.95 million in April, based on data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday evening. 

This was lower by 43% than the $660.38 million net outflow a year earlier, and by 31% than the $540.97 million net outflow in March. 

“Developments during the month included investor reaction to easing inflation, contraction of the country’s gross domestic product in 2020, extension of local quarantine measures, progress of the government’s vaccination program and the continued rise of infections in the country,” the central bank said in a statement. 

The Philippine Statistics Authority said the economy shrank by 9.6% in 2020, a tad steeper than the 9.5% drop earlier reported. 

The hot money net outflow in March reflects the “continued adverse market effects caused by the record high local infection cases logged in March and April, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort. 

The number of new coronavirus disease 2019 (COVID-19) patients rose by an average of 10,000 from late March to early April, which prompted the government to tighten quarantine restrictions in Metro Manila and nearby provinces.  

Central bank data showed inflows in April rose 3.8% to $651.16 million from $627.02 million a year ago, but declined by 21%  from the $824.23 million in February. 

Meanwhile, outflows fell 20.4% to $1.025 billion from April 2020’s $1.287 billion. It was also smaller by 24% than the $1.365 billion outflow a month ago. 

The top five investors during the month were United Kingdom, United States, Luxembourg, Singapore and Norway, the BSP said.  

More than half (68.9%) of the investments went to securities listed in the Philippine Stock Exchange, mainly property companies, banks, holding firms, food, beverage and tobacco companies and transportation services firms. 

Meanwhile, nearly a third (31%) of hot money flows went to government securities. 

Hot money posted a net outflow of $857.44 million, lower by 58.5% than the $2.067 billion of net outflow seen in the same period of 2020. 

The central bank expects foreign portfolio investments to post a net inflow of $5.7 billion this year.  — Luz Wendy T. Noble 

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