Advertisement

$660M in ‘hot money’ exits PHL in April

Font Size

George Washington is seen with a printed medical mask on the one dollar banknote in this illustration taken, March 31. -- REUTERS

By Luz Wendy T. Noble, Reporter

AROUND $660 million in foreign capital left the Philippines in April as investors pulled out due to worries over the widening economic impact of the coronavirus pandemic and the resulting lockdown.

Foreign portfolio investments — also called “hot money” due to the ease by which these funds enter and leave the economy — posted a second consecutive month of net outflow of $660.38 million in April, according to data from the Bangko Sentral ng Pilipinas (BSP) released on Thursday.

This is slimmer than the $961.08-million net outflow in March but wider than the $298.83- million net outflow recorded in April 2019.

The BSP said the US-China trade negotiations, escalating geopolitical tensions between the US and Iran, and the renegotiation of local water concessionaire contracts may have impacted investor sentiment.

For the month of April, gross inflows totaled $627.02 million, lower than the $953.77 million seen in March as well as the $989.96 billion recorded in the same month of 2019.

Meanwhile, gross outflows amounted to $1.287 billion, a decline from the $1.914 billion posted in the prior month and also slightly lower than the $1.288 billion logged in April 2019.

Majority or 91.2% of the investments went into the stock market, particularly shares in holding firms, banks, property developers, food and beverage companies, tobacco manufacturers, and telecommunications providers. The remaining 8.8% were funneled into government securities.

“The United Kingdom, the United States, Singapore, Hong Kong and Switzerland were the top five investor countries for the month, with combined share to total at 85.5%,” the central bank said.

Alvin P. Ang, an economics professor at the Ateneo de Manila University, said the net outflow reflects the risk-off sentiment seen in the local stock market due to the coronavirus disease 2019 (COVID-19) outbreak and the subsequent implementation of the enhanced community quarantine.

“The stock market is so thin and there is a lack of foreign players. It’s really the COVID-19 [which is the culprit],” he said in a text message.

To recall, the Philippine Stock Exchange was shut down for two days at the onset of the Luzon lockdown in March. Since its resumption, the local bourse has seen a slight recovery.

Other factors that triggered risk-off sentiment include the US-China trade war as well as the oil price fluctuations.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also blamed the ongoing coronavirus crisis for the continued exit of hot money from the country.

“Net outflows were largely due to the COVID-19 pandemic and the lockdowns that caused reduced economic activities and increased global market volatility,” he said in a text message.

Mr. Ricafort said market sentiment may improve as economies gradually restart and businesses progressively resume operations.

“Sentiment in the local financial markets could improve as the local economy eases lockdowns and restart economic activities that could further improve valuations on various investments,” he said.

For his part, Mr. Ang said improved investor sentiment will likely be seen in the fourth quarter, when worries over the pandemic and the lockdown would have already subsided.

“The recovery is [dependent on] how good we manage the ECQ (enhanced community quarantine and GCQ (general community quarantine). Maybe it will be in the fourth quarter,” he said.

The government is expected to announce its plans regarding lockdown measures for June. Metro Manila mayors had earlier said they support the transition to GCQ for the National Capital Region.

The country saw its largest single-day increase of 539 new infections on Thursday, bringing the total to 15,588. The death toll has reached 921 while recoveries totaled 3,598, according to health officials.

In November before the outbreak occurred, the BSP initially projected foreign portfolio investments to yield a net outflow of $8.2 billion in 2020.





Advertisement