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Almost $1 billion hot money left Philippines in March

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By Luz Wendy T. Noble, Reporter

ALMOST $1 billion in foreign capital left the country in March, reflecting investor preference for safe-haven assets as a Luzon-wide lockdown meant to contain a coronavirus pandemic brought the Philippine economy to a standstill.

Foreign portfolio investments posted a net outflow of $961.05 million in March, reversing from a net inflow of $40.06 million a month earlier, the Philippine central bank said in a statement late Thursday.

The hot money net outflow was also wider than the $739 million net outflow in March last year, according to Bangko Sentral ng Pilipinas (BSP) data.

The central bank cited negative sentiment “that has prompted investors to liquidate portfolios and keep money in cash amid heightened worries over the adverse economic impact of the coronavirus disease 2019 (COVID-19) pandemic.”

The net outflow also came despite the government’s initial fiscal stimulus package against the virus, which has sickened more than 10,000 and killed almost 700 people in the Philippines.

Aside from the pandemic, US-Iran tensions, trade negotiations between the US and China, and government review of local water contracts had affected foreign investor sentiment, the central bank said.

March gross inflows reached $953 million, lower than the $1.374 billion posted in February and the $1.732 billion a year ago.

Gross outflows hit $1.914 billion, worse than the $1.334 billion gross outflows a month earlier but lower than the $2.471 billion posted in March last year.

Majority or 93% of the investments during the month were placed in shares on the Philippine Stock Exchange, particularly banks, property, holding, food, beverage and tobacco, and transport companies.

The remaining 7% of the investments were channeled to government securities.

The top five investor economies with a combined share of 83.9% in total portfolio investments were the United Kingdom, United States, Singapore, Hong Kong and Luxembourg, BSP said.

“It’s definitely the COVID-19’s handiwork at play here in this horrendous outflow,” Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc. said in an e-mail.

“With the COVID-19 pandemic, everything turned south and the general economic outlook turned sour,” he added.

The Philipine economy shrank by 0.2% in the first quarter, the first contraction since the fourth quarter of 1998.

The outbreak had induced a sell-off in March as countries including the Philippines locked down major cities to contain it, Nicholas Antonio T. Mapa, a senior economist at ING Bank-NV Manila said.

President Rodrigo R. Duterte locked down the entire Luzon island in mid-March suspending work, classes and public transportation to contain the outbreak. He extended the so-called enhanced community quarantine in Metro Manila and other key regions until May 15.

Analysts earlier said the central bank would have to revise its hot money goal this year of $8.2 billion net inflows, made before the pandemic hit the globe.

Investor sentiment may turn positive again once markets see a glint of a gradual economic recovery, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

“Financial market sentiment could improve once the lockdowns are eased in the coming months and as the economy is allowed to gradually restart,” he said.





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