‘Hot money’ worth $1.24B exits PH
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Fri, 22 Nov 2019 16:20:58 +0000
FOREIGN portfolio investments hit a net outflow of $1.24 billion as of the first week on November, Bangko Sentral ng Pilipinas (BSP) data showed, with analysts blaming uncertainties in the ongoing trade war between the United States and China for their exit.
The central bank’s latest update on such investments, or “hot money” — called as such because of the ease these can be taken in and out of an economy — put year-to-date inflows at $14.65 billion against total outflows of $15.90 billion.
In the same period last year, these investments reached a net inflow of $14.84 million.
The week ending November 8 saw $24.53 million leave the country.
“Latest developments on the trade-war front have really been weighing on markets,” Security Bank Assistant Vice President and economist Robert Dan Roces said.
He explained that “investments pulled out on [a] risk-off scenario as sustained uncertainties are causing investors to flee risky assets and flock into safe havens assets.”
Roces warned that more outflows are expected if a trade agreement between the world’s two biggest economies is not signed soon.
“The cumulative net foreign portfolio investment outflow position for the year-to-date reflects rising concerns in Asian financial markets during 2019 about the impact of the ongoing US-China trade war and moderating economic growth in the European Union on Asian exports,” IHS Markit APAC chief economist Rajiv Biswas said.
Despite this, he believes that the Philippines’ continued strong economic growth and the central bank’s recent interest rate cuts “have continued to underpin the economy, keeping net portfolio capital outflows relatively constrained.”
In October, foreign portfolio investments reverted to the positive territory after $104.53 million of these entered the country.
Net outflows of these investments last week reversed the $231.71 million and $67.83 million outflows posted in September and a year ago, respectively.
Hot money is mostly invested in the stock market and does not necessarily create jobs, unlike foreign direct investments that are used to build factories and buy capital equipment.
Speculative funds invested in financial assets are a component of the Philippines’ balance of payments, which summarizes the country’s economic transactions with the rest of the world over a certain period.
The Bangko Sentral expects this type of investment to post a net inflow of about $4 billion this year.
Last year, these investments surged to a net inflow of $1.204 billion, the highest in five years and an about-face from 2017’s $195.40-million outflow.
The 2018 tally was also better than the BSP’s forecast of a $100-million net outflow and was the largest net inflow since 2013’s $4.225 billion.
The United Kingdom, the United States, Singapore, The Netherlands and Hong Kong were the top five investor-countries for the year, making up 72.8 percent of the total.
The US remained the main destination of outflows, accounting for 78.8 percent of the total.