BSP reports $1.9-billion net hot money outflow in 2019

Published January 16, 2020, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

Foreign investors’ “hot money” transactions in the Philippines in 2019 is a net outflow of $1.9 billion, reversing 2018’s $1.2 billion net inflows which the central bank said was due to “investor reaction to the passage of the first phase of the government’s tax reform program” which encouraged fund flows at the time.

In 2019 however, investor sentiment was affected by several external factors such as the US-China trade conflict, the heightened protests in Hong Kong, and the attacks on Saudi Aramco’s oil facilities in Saudi Arabia which triggered the largest recent jump in oil prices, according to the Bangko Sentral ng Pilipinas (BSP).

On the domestic front, investors also reacted to the following: passage of the rice tariffication law; the mid-term elections; easing inflation; the BSP’s decision to reduce the reserve requirement ratio; and the rebalancing of the Morgan Stanley Capital International Philippines Index to reflect its new weightings.

“President Duterte’s strong views on the alleged onerous provisions of Maynilad Water Services and Manila Water Co.’s concession agreements (as well as the) US House of Representatives vote to impeach President Trump,” also impacted on investors’ decisions to bring in money or not, noted the BSP.

BSP registered $18.5 billion worth of foreign portfolio investment outflows for 2019 versus $16.6 billion inflows for the year.

The resulting net outflows of $1.9 billion were withdrawals broken down as: Philippine Stock Exchange (PSE)-listed shares ($1.7 billion); peso government securities ($228 million); and other portfolio instruments ($22 million).

The 2019 outflows of $18.5 billion were 24.8 percent higher compared to $14.8 billion in 2018. “Majority (or 97.1 percent) of these outflows represented capital repatriation while the remaining 2.9 percent pertained to remittance of earnings.

The US received 75.1 percent of total outflows,” the BSP said.

Inflows in 2019 worth $16.6 billion is also 3.5 percent more than 2018’s $16 billion and these funds were invested as: securities listed in the PSE (77.7 percent) mainly investment in holding firms, property companies, banks, food, beverage, and tobacco firms, and retail companies; and the balance invested in peso GS (22.3 percent) and other portfolio instruments.

The BSP said the United Kingdom, the US, Singapore, Malaysia, and Hong Kong were the top five investor countries during the year, with combined share to total of 74.3 percent.

“Transactions during the first quarter of 2019 yielded net inflows of $363 million, while all other quarters resulted in net outflows (second – $1.1 billion; third – $608 million; and fourth – $571 million),” noted the BSP.

“Some developments for the second quarter of the year included: the delayed approval of the 2019 national government budget; investor reaction to the April earthquake that jolted parts of Luzon and Visayas; and the holding of the country’s midterm elections. It may be noted that quarterly transactions in 2018 recorded net inflows for the first ($766 million) and fourth quarters ($1 billion), while net outflows were recorded for the second ($443 million) and third quarter ($161 million),” the BSP explained.