Hot money net outflows reached $4.2B in 2020

Published January 29, 2021, 1:01 PM

by Lee C. Chipongian

The global virus outbreak impacted on the country’s foreign portfolio investment or hot money which was a net outflow of $4.24 billion in 2020, unsurprisingly bigger than the net outflows in 2019 of $1.9 billion, as investors prefer to be liquid during the pandemic.

The Bangko Sentral ng Pilipinas (BSP) had projected an end-year net inflow of $2.8 billion for 2020, in December. This was higher than its September projection of $2.4 billion. For this year, the BSP estimates hot money inflows of $3.5 billion.

Photographer: Paul Yeung/Bloomberg file

“Developments for the year included the ongoing impact of the COVID-19 pandemic to the global economy and financial system, along with international and domestic developments throughout the year such as geopolitical tensions, certain corporate governance issues and extended community quarantine measures in various regions in the country,” the BSP said in a statement.

BSP registered gross foreign portfolio inflows of $15.92 billion in 2020 versus outflows of $11.68 billion.

The inflows were lower compared to 2019’s $16.60 billion while outflows were also lower from $18.50 billion.

The BSP said the net outflows in 2020 were from the Philippine Stock Exchange (PSE)-listed shares of $3.3 billion; peso government securities of $931 million; and other portfolio instruments of $22 million.

Foreign portfolio investments also include peso time deposits with banks that have 90 days tenor at least, unit investment trust funds, and other portfolio investments such as Exchange Traded Funds and Philippine Depositary Receipts.

The BSP said inflows were predominantly in PSE-listed securities or about 80.5 percent. These funds were invested in property companies, holding firms, banks, food, beverage and tobacco firms and information technology companies. Another 19.5 percent were invested in peso government securities.

The United Kingdom, Singapore, US, Luxembourg and Hong Kong were the top five investor countries during the year, with combined share to total of 78.2 percent, according to the BSP.

In the meantime, about 96.9 percent of registered outflows were capital repatriation and the remaining 3.1 percent were remittance of earnings, said the BSP. “The US continued to be the main destination of outflows with 63.8 percent of total,” it added.

The BSP kept a $2.8 billion hot money net inflow projection for 2020 because as it noted back in October 2020: “While uncertainty continues to weigh down on business and investor confidence, factors such as 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 its expected gradual economic recovery are also seen to support foreign investment inflows for the rest of the year.”