Hot money outflows bigger in March

Published April 29, 2021, 2:30 PM

by Lee C. Chipongian

The central bank-registered foreign portfolio investments or hot money net outflows reached $540.97 million in March, up from February’s withdrawals of $40.41 million.

Based on Bangko Sentral ng Pilipinas (BSP) data, March is the biggest monthly outflows so far. However compared to same time in 2020 of $961.08 million net outflows, it’s lower. Major economic centers such as the National Capital Region (NCR) in the March months last year and in 2021 were both under strict lockdown measures.

“Developments during the month included investor reaction to rising inflation and vaccine rollout amid the surge in virus infection and reimposition of restrictions on mobility in the NCR and nearby provinces,” the BSP said in a statement.

Besides the COVID-19 pandemic impact to the global economy and financial system, hot money flows were also affected – in 2020 and in 2021 – by the new US administration under President Biden, vaccine rollout and the reimposition of additional quarantine measures amid the surge in virus infection, said the BSP. “Year-to-date transactions for investments in PSE (Philippine Stock Exchange)-listed securities and other investment instruments resulted in net outflows, while those for peso government securities yielded net inflows,” the BSP added.

The BSP registered $1.365 billion gross outflows in March and $824 million gross inflows. These are lower from March 2020’s $1.914 billion and $953 million.

Hot money inflows are inward foreign investments in the PSE, peso-denominated government securities, peso time deposits with banks with minimum tenor of 90 days, and other peso debt instruments. These funds are also invested in unit investment trust funds and other portfolio investments such as Exchange Traded Funds and Philippine Depositary Receipts.

About 90.5 percent of investments were in listed securities such as banks, property companies, holding firms, food, beverage and tobacco companies and transportation services firms. Another 9.5 percent were invested in peso government securities.

The BSP said the United Kingdom, US, Luxembourg, Switzerland and Hong Kong were the top sources of hot money in March. These five countries combined had 78.7 percent of total registered foreign funds.

Photographer: Paul Yeung/Bloomberg file

For this year, the BSP forecasts hot money net inflows of $5.7 billion and $7.4 billion in 2022.

Last year, net outflows totalled $4.24 billion due to the pandemic, higher than BSP’s $2.8 billion projection.