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Hot money booked $1.9-B net outflow in 2019, says BSP

Global and domestic uncertainties compelled foreign fund managers to pull out their portfolio investments from the local financial markets in 2019, data from the Bangko Sentral ng Pilipinas show.

The BSP said in a statement registered foreign portfolio investments or “hot money” yielded a net outflow of $1.9 billion last year, a turnaround from the $1.2-billion net inflow in 2018. It also missed the official target of $8-billion net inflow for the year.

Data showed that gross inflows reached $16.6 billion in 2019, up from $16.03 billion in 2018, while total outflows climbed to $18.5 billion from $14.82 billion.

“Developments for the year included [the] ongoing trade tension between the US and China; passage of the Rice Tariffication law; the holding of the country’s mid-term elections; easing domestic inflation; heightened protests in Hong Kong; attacks on Saudi Aramco’s oil facilities in Saudi Arabia which

triggered the largest recent jump in oil prices; and BSP’s decision to reduce the reserve requirement ratio for universal/commercial and thrift banks,” it said.

Other developments were “the rebalancing of the Morgan Stanley Capital International Philippines Index to reflect its new weightings; President Duterte’s strong views on the alleged onerous provisions of Maynilad Water Services Inc. and Manila Water Co. Inc.’s concession agreements; and the US House of Representatives vote to impeach President Trump.”

The net outflow of $1.9 billion included $1.7 billion in Philippine Stock Exchange-listed shares, $228 million in peso government securities and $22 million in other portfolio instruments.

The United Kingdom, the US, Singapore, Malaysia and Hong Kong were the top source of portfolio investments last year.

Registration of inward foreign investments with the Bangko Sentral ng Pilipinas is optional under the liberalized rules on foreign exchange transactions. 

Portfolio investments are also called hot money because of the ease they are invested in and taken out of the domestic financial markets.  The BSP expects hot money to post a net inflow of $8.2 billion in 2020.

Topics: Bangko Sentral ng Pilipinas , Rice Tariffication law , Saudi Aramco , Maynilad Water Services , Manila Water , Morgan Stanley Capital International Philippines Index
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