Hot money outflow hits $205 M in 2017

MANILA, Philippines - Foreign portfolio investments or hot money recorded an overall net outflow of $205.03 million in 2017, a reversal of the net inflow of $404.43 million in 2016, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Foreign portfolio investments are often referred to as hot money because these can enter and leave a market very easily.

“While net outflows were noted starting in the first quarter of 2017 ($568 million), attributable to international and domestic developments (such as the interest rate increases in the US and the closure order for several mining companies in the country), the figure has subsequently declined as investors reacted positively to the various developments in the country, including the approval of the first phase of the tax reform program of the government,” the BSP said.

According to the BSP, the aggregate foreign portfolio investments amounted to $16.1 billion in 2017, 8.9 percent lower than the $17.6 billion recorded in the previous year.

Nearly 82 percent of the investments in 2017 were channeled to Philippine Stocks Exchange listed securities, while the rest went to peso-denominated government securities.

The bulk or 74.8 percent of the portfolio investments came from the United Kingdom, US, Singapore, Luxembourg and Malaysia.

On a monthly basis, the BSP said the lowest gross inflows in 2017 were recorded in August ($936 million), while the peak was seen in June ($2 billion).

On a quarterly basis, the largest inflows was seen in the second quarter at $4.8 billion, accounting for 30 percent of the total hot money for 2017.

“This may be attributed to positive investor sentiment arising from the World Bank’s view that the Philippines will continue to be a top performer in the region, and the conflict resolution in Marawi City,” the BSP said.

“These were further supported by accelerated net foreign buying as well as the approval by Congress of the first phase of the tax reform package,” it added.

Outflows, meanwhile, amounted to $16.3 billion in 2017, 5.2 percent lower as compared to $17.2 billion in 2016.

“About 96.4 percent of the outflows represented capital repatriation, with the remaining 3.6 percent pertaining to earnings,” the central bank said.

The BSP said the US continued to be the main destination of outflows, receiving 80.2 percent of the total.

Under the liberalized rules on foreign exchange transactions, the registration of inward foreign inverstments with the BSP is optional.

The issuance of a BSP registration document entitled the investor to buy foreign exchange from authorized agent banks and/or their subsidiary for repatriation of capital and remittance of earnings.

“Without such registration, the foreign investor can still repatriate capital and remit earnings on his investment, butthe foreign exchange will have to be sourced outside the banking system,” the BSP said.