More foreign funds leave Philippines in October

Font Size

Foreign fund flows are expected to be more volatile as markets anticipate the US Federal Reserve's next interest rate increase that could come next month -- the third for the year. -- AFP

MORE FOREIGN FUNDS left the country in October — marking the biggest outflow in almost a year — led by net outflows from the Philippine Stock Exchange (PSE) and peso-denominated government securities, the central bank reported yesterday.

Foreign portfolio investments posted a $563.42-million net outflow last month, a reversal from September’s $112.63-million and October 2016’s $59.87-million net inflows.

These funds are called “hot money” given the ease by which they enter and leave markets.

Last month saw the biggest net outflow since the $607.31 million that left in November 2016, according to central bank data.

October’s $1.385-billion gross inflows were up 6.8% from September’s $1.296 billion but were down 15% from the $1.633 billion that entered in October last year.

October’s total outflows, however, eclipsed gross inflows that month, as well as funds that went out in September and a year ago. Specifically, $1.948 billion left in October, about 64.5% more than September’s $1.184-billion total outflows and 23.8% more than the $1.573 billion that went out in October last year.

Last month’s total outbound funds were the biggest in over a year or since some $2.081 billion exited the country in September 2016.

The BSP attributed the year-on-year and month-on-month increase in gross outflows to “profit taking”, with the United States remaining the main destination of outflows, accounting for 75.5% of the total. Central bank data showed outflows spiking in September and October, which had seen successive record highs at the PSE that were followed by episodes of correction.

Around 89.8% of total investments went to PSE shares, particularly those of holding companies; property firms; mining; banks; as well as food, beverage and tobacco companies. These transactions yielded $513 million in net outflows.

A tenth of portfolio placements went to peso-denominated government debt papers (but whose transactions resulted in $47-million net outflows) while the balance was infused in other peso-denominated debt instruments ($1-million net inflows) and peso time deposits ($4-million net outflows).

Most of the investments in October came from the US, the United Kingdom, Norway, British Virgin Islands and Luxembourg

The October figure brought year-to-date hot money tally to an $812.17-million net outflow, a reversal from the $1.471-billion net inflows in 2016’s comparable 10 months. The central bank expects a $900-million net outflow for the entire 2017, a reversal from 2016’s net inflow.

Apart from domestic concerns — October saw the end of the five-month battle to retake Marawi City from Islamic State-inspired militants — external developments like expectations of additional interest rate hikes from the US Federal Reserve, global terrorist attacks and tensions in the Korean peninsula influenced investor sentiment. — Melissa Luz T. Lopez

Comments are closed.