‘Hot money’ flees for 7th straight month

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Foreign portfolio investments reported a net outflow of $ 493.65 million in September. — REUTERS

By Luz Wendy T. Noble, Reporter

“HOT MONEY” continued to exit the Philippines for the seventh straight month in September, as investors worried over the extension of some lockdown restrictions due to the rise in coronavirus disease 2019 (COVID-19) infections.

Foreign portfolio investments (FPI) — dubbed as “hot money” due to the ease by which these funds enter and leave an economy — posted a net outflow of $ 493.65 million in September, data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday showed.

The September tally was the biggest net outflow since the $ 1.006 billion posted in May. It was also more than double the $ 231.71-million net outflow logged in September 2019, and triple the $ 126.76-million net outflow seen in the previous month.

FPIs yielded a net outflow of $ 4.5 billion in the January to September period, surging 238.46% from the $ 1.3-billion net outflow logged in the first nine months of 2019.

The continued exit of hot money was mainly due to uncertainties over the pandemic and the extent of its impact on the global economy. Geopolitical tensions, extended lockdown restrictions in some parts of the Philippines, as well as corporate governance issues also clouded investor sentiment, the BSP said.

The central bank projects hot money to yield net inflows of $ 2.4 billion and $ 3.5 billion in 2020 and 2021, respectively.

For the month of September, FPI inflows plunged 54.35% to $ 594.02 million from $ 1.301 billion a year ago. It also dropped by 10.87% from the $ 666.51 million booked the prior month.

Meanwhile, hot money outflows reached $ 1.087 billion, down by 29% from the $ 1.533 billion a year ago. However, it was bigger by 37% from the $ 793.27 million in August.

Investments mainly came from Singapore, the United Kingdom, the United States, Luxembourg, and Switzerland, which accounted for 82.6% of the total, the BSP said.

A big chunk or 92.5% of the investments were channelled into securities of holding firms, property companies, food, beverage, and tobacco firms, retail, and banks. The rest went into investments in government securities.

The recent improvement in the local stock market may soothe investor concerns and boost hot money in the coming months, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

For Asian Institute of Management economist John Paolo R. Rivera, the signs of recovery in the local bourse are “not yet consistent and not yet clear” to push investors to make long-term investment decisions.

Mr. Rivera said the market will be on the lookout for “clear and timely plans from authorities to signal that the economy is moving towards the new normal with appropriate mechanisms in place to create an ecosystem conducive for investors.”

On the other hand, some investors may look to the Philippines for their short-term portfolio investments amid some domestic political tensions in neighboring countries, Mr. Rivera added.

“The Philippines is not facing any widespread demonstration like in Thailand and Hong Kong making us a prospective destination for FPI provided we can guarantee a safe and conducive environment,” he said.

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