Foreign fund managers pulled out their investments from the domestic financial markets in March as they reacted negatively to the impact of coronavirus disease 2019 pandemic to the global economy, Bangko Sentral ng Pilipinas said Friday.
Data from the BSP show registered foreign portfolio investments or “hot money” for the month posted a net outflow of $961 million, a reversal of the $40-million net inflow a month ago.
The figure was also higher than the $739-million net outflow in the same month a year ago. Total outflows in March hit $1.9 billion against inflows of $954 million.
“Outflows for the month ($1.9 billion) were higher by 43.5 percent compared to the level recorded for February ($1.3 billion). This may be attributed to the general risk-off sentiment in the market that has prompted investors to liquidate portfolios and keep money in cash amid heightened worries over adverse economic impact of the coronavirus (COVID-19) pandemic and despite the initial fiscal stimulus package of the government,” the BSP said.
The United States accounted for 68.5 percent of the total outflows.
About 93.0 percent of investments registered during the month were in securities listed in the Philippine Stock Exchange, pertaining mainly to property companies, holding firms, banks, food, beverage and tobacco companies and transportation services firms. The balance comprised of investments in peso government securities.
The United Kingdom, the US, Singapore, Hong Kong and Luxembourg were the top five investor countries for the month, with a combined share of 83.9 percent of the total.
Portfolio investment transactions from Jan. 1 to April 3, 2020 yielded net outflows of $1.5 billion, resulting from $5.2 billion in gross outflows and $3.7 billion in gross inflows. The net was a reversal from $293 million posted in the same period last year.
The BSP attributed the net outflows to the uncertainties due, among others, to the impact of the COVID-19 pandemic to the global economy and financial system, and other key events earlier in the year such as geopolitical tensions between the US and Iran, the trade negotiations between the US and China, and renegotiation of the contracts of the country’s water concessionaires.
Registration of inward foreign investments with the BSP is optional under the liberalized rules on foreign exchange transactions. The issuance of a BSP registration document entitles the investor or his representative to buy foreign exchange from authorized agent banks or their affiliate foreign exchange corporations.
Without such registration, the foreign investor can still repatriate capital and remit earnings on his investment but the foreign exchange will have to be sourced outside the banking system.
Portfolio investments are also called “hot money” because of the ease they are invested in and taken out of the domestic financial markets.
In 2019, hot money posted a net outflow of $1.9 billion, a turnaround from the $1.2-billion net inflow a year ago and missed the official target of $8 billion net inflow for the year.
Total inflows for the year reached $16.6 billion, up from $16.03 billion a year ago, while total outflows hit $18.5 billion, significantly higher than the $14.82 billion on year.