Foreign portfolio investments yield net outflow

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BSP
HOT MONEY flew out of the country in September amid local and foreign issues.

By Melissa Luz T. Lopez, Senior Reporter

MORE FOREIGN CAPITAL exited the Philippines in September, marked by sustained net foreign selling of local stocks amid concerns on surging consumer prices and a weaker peso, the central bank said yesterday.

Foreign portfolio investments posted a $440.3-million net outflow last month, reversing the $225.85 million net inflow in August as well as the $112.63 million in fresh capital which entered the country in September 2017.

These flighty investments are often called “hot money,” as such funds enter and leave the country with ease.

September’s tally is the biggest net withdrawal since the $516.12 million outflow recorded in June. Investor appetite turned sour last month amid concerns on local and global issues.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said market players are cautious about the trend weakness of the peso, which has depreciated by over eight percent year-to-date against the dollar, as well as the “continued uptick” in inflation likely aggravated by the effects of typhoon Ompong (international name: Mangkhut).

Prices of widely-used goods rose by 6.7% last month, a fresh nine-year high amid surging costs of food; transport; and housing, utilities and fuel, the Philippine Statistics Authority said. This brought the nine-month inflation tally to five percent, well above the BSP’s 2-4% target range.

The BSP raised interest rates by another 50 basis points during their Sept. 27 policy meeting to rein in inflation expectations and temper excessive exchange rate swings.

Worsening trade tensions between the United States and China also kept foreign investors wary about placing their money in the Philippines, the central bank said.

Foreign firms invested $743.31 million in the Philippines in September, a third lower than the $1.121 billion infused the previous month.

These investments were cancelled out by $1.184 billion in outbound capital, also a third higher than the $895.31 million withdrawals in August and is the biggest seen in three months.

Bulk of the hot money placements were invested in listed firms at the Philippine Stock Exchange, particularly into holding firms; banks; property companies; food, beverage and tobacco firms; and telecommunication companies. This led to a $351 million net outflow, which came at a time of sustained net foreign selling at the local bourse.

Around 14.3% of the investments went into peso debt papers, which also resulted to an $89-million outflow.

By source, the biggest sources of capital are investors in the United Kingdom, the US, Singapore, Switzerland and Malaysia.

Despite September’s slump, hot money netted a $161.71 million net inflow for the first nine months. The BSP expects foreign portfolio investments to net a $900-million outflow by yearend, which would be wider than the $205.03 billion in withdrawn capital last year.