Hot money outflow breaches $1-billion mark

MANILA, Philippines — Net outflow of speculative funds or hot money breached the $1 billion level in the first eight months after surging in August amid the US-China trade war, devaluation of the Chinese renminbi as well as heightened protests in Hong Kong, according to the Bangko Sentral ng Pilipinas.

Based on BSP data, the country’s foreign portfolio investments recorded a net outflow of $1.1 billion from January to August, reversing the net inflow of $602 million in the same period last year.

 The central bank also cited the slower-than-expected gross domestic product (GDP) growth in the first half, lower than the government target of six to seven percent for 2019.

 Foreign portfolio investments are also called hot or speculative money because of its flighty nature. These funds are being pulled out from emerging markets such as the Philippines due external headwinds including the US-China trade war.

 BSP data showed hot money inflows climbed by 9.5 percent to $11.74 billion in the first eight months from $10.72 billion in the same period last year, while outflows jumped by nearly 27 percent to $12.84 billion from $10.11 billion.

 The Philippine recorded a higher net outflow of foreign portfolio investments amounting to $391.74 million in August from a net inflow of $225.85 million in the same month last year.

 The BSP said inflows increased by 8.2 percent to $1.21 billion in August from $1.12 billion in the same month last year, while outflows jumped by 79.3 percent to $1.6 billion from $895.31 million.

 About 76 percent of investments registered in August were in listed securities at the Philippine Stock Exchange including property companies, holding firms, banks, food, beverage and tobacco companies, and transportation firms.

 The balance of 24 percent balance went to investments in peso government securities. 

Inflows came from the United Kingdom, Singapore, the US, Malaysia, and Hong Kong accounting for 73.9 percent, while 78 percent of outflows went to the US.

Based on its latest assessment, the BSP now expects a net inflow of foreign portfolio investments of $4 billion, a reversal of the previous forecast of $200 million in net outflow this year.

 The Philippines recorded a net outflow of foreign portfolio investments amounting to $205.03 million last year, reversing the net inflow of $404.43 million in 2017 as inflation overshot the BSP’s two to four percent target while trade tension between the US and China continued to escalate.