BSP: $340M net ‘hot money’ exited Philippines in July

Foreign portfolio investments or “hot money” swung to a net outflow of $340 million in July 2021, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.

Data released by the BSP on Thursday showed the $340-million net “hot money” in July is a reversal from a net inflow of $335 million recorded in June.

Foreign portfolio investments are also called hot money because of the ease by which the funds enter and leave markets.

The net outflow in July resulted from gross outflows of $1.1 billion, which surpassed gross inflows of $730 million during the month.

In particular, the gross inflows last month were 65.3% lower compared to the $2.1 billion recorded in June.

The BSP said about 64.4% of investments registered were in Philippine Stock Exchange-listed securities mainly in property companies, holding firms, food, beverage and tobacco companies, banks and transportation services.

The remaining 35.6% went to investments in peso government securities.

The United Kingdom, United States (US), Singapore, Norway, and Luxembourg were the top five investor countries for July with combined share to total at 77.1%.

Meanwhile, the $1.1 billion gross outflows last month were lower by 39.6% than the $1.8 billion level recorded in June.

The US received 63.5% of total outflows.

The BSP said the developments during the month that could have affected the inflow and outflow of foreign portfolio investments are as follows:

•     release of inflation data for June 2021
•     reports of vaccinations put on hold by some local government units due to supply constraints
•     rising COVID-19 cases due to the more contagious Delta variant strain

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•     announcement of the reimposition of enhanced community quarantine in Metro Manila from August 6 to 20, 2021

The central bank said the said domestic developments were accompanied by the affirmation of Fitch Ratings of the county’s credit rating at “BBB,” which is one notch above the minimum investment grade; however, the outlook on the rating was adjusted from “stable” to “negative.”

The release of the personal remittances data from overseas Filipinos rising by 13.3% to $2.652 billion in May 2021 from US$2.341 billion in May 2020 also affected investor behavior.

Year-on-year, gross inflows rose by 1.5% from the $719 million recorded in July 2020.

Gross outflows, meanwhile, were lower than the outflows recorded a year ago by 8.8%.

Year-to-date, foreign portfolio investments yielded a net outflow of $446 million, lower than the $3.8 billion net outflow recorded in the same period last year amid the ongoing impact of the COVID-19 pandemic to the global economy and financial system.

The central bank attributed the lower year-to-date net outflow to the following domestic and international developments:

•     new US administration
•     progress of vaccine rollout in the country
•     continuing quarantine restrictions to contain the surge in COVID-19 infections, especially with the rise in the Delta variant cases
•     the country’s inflation breaching the 2.0 to 4.0% target which is consistent with the outlook that such will persist during the first half of this year due to supply-side pressures
•     improving market sentiment amid positive economic growth in second quarter of 2021 and passage of key fiscal and asset management reforms.

—AOL, GMA News