$439-M net hot money inflows posted in October

Published November 26, 2020, 4:15 PM

by Lee C. Chipongian

For the first time during the pandemic, the Bangko Sentral ng Pilipinas (BSP) reported $439.46 million of foreign portfolio investments or hot money net inflows in October, reversing the $493.65 million net outflows in September and all other months of fund withdrawals since March this year when the country was placed in lockdown.

 After seven months in a row of net outflows, the end-October hot money was still a net outflow of $3.943 billion, more than the net outflow of $1.225 billion same time in 2019.

 For the month of October only, the BSP registered $1.352 billion gross inflows versus $913.49 million gross outflows. These funds are placed in the Philippine Stock Exchange, peso-denominated government securities and peso time deposits with banks with minimum tenor of 90 days. Investors also invests in other peso debt instruments, unit investment trust funds, and other portfolio investments such as Exchange Traded Funds and Philippine Depositary Receipts.

 The BSP noted that 78.8 percent of investments registered in October were in listed securities such as information technology firms, banks, holding firms, property companies and food, beverage and tobacco firms. Another 21.2 percent were invested in peso government securities. “The United Kingdom, the US, Singapore, Luxembourg and Hong Kong were the top five investor countries for the month, with combined share to total at 80.9 percent,” said the BSP. The US, in the meantime, continue to account for bulk of withdrawals or 64.6 percent of total outflows.

 The BSP said hot money January to October flows remain in net outflows because of the pandemic-induced uncertainties. The Philippines has the longest community quarantine restrictions in the world.

“The ongoing impact of the COVID-19 pandemic to the global economy and financial system coupled with international and domestic developments such as geopolitical tensions, certain corporate governance issues and extended quarantine measures in select regions in the country” all contributed to the net outflows in hot money data, said the BSP.

For this year, the BSP forecasts foreign portfolio investments to reach $2.4 billion net inflows and in 2021, to improve further to $3.5 billion.

Last week, during his regular “GBED Talks”, BSP Governor Benjamin E. Diokno said hot money and foreign direct investments (FDI) are expected register net inflows in 2020. The net FDI is estimated to end the year at $5.6 billion and $7 billion in 2021.

Diokno said that foreign investment inflows for the rest of the year “are expected to be supported by expectations of a better-than- initially-anticipated global economic performance for the year; the reopening of advanced economies with investment interest in the Philippines; the country’s investment-grade credit standing; and the country’s expected gradual economic recovery.”