More ‘hot money’ flees RP in November

Portfolio investments continued to flee the country in November, suffering from tightening global liquidity that persisted despite efforts of central banks to release more funds into the global financial system.

Data from the Bangko Sentral ng Pilipinas (BSP) revealed that foreign portfolio investments registered with the central bank fled the Philippine market in November, with a net outflow of $399 million, bigger than the October outflow of $389.8 million.

“Investors continued to be driven primarily by concerns over the weakening of major economies, particularly that of the US, despite temporary optimism over the results of the presidential elections there,” BSP Governor Amando M. Tetangco Jr. said.

With the latest November data, the total net outflow of foreign portfolio investments now stood at $1.309 billion from January to November, a dramatic turn-around form last year’s total inflow which accounted to a whopping $3.726 billion.

Tetangco said the numbers were reflected in the total amount of registered portfolio investments. Registration of inward foreign investments with the BSP is voluntary and entitles the investor to buy foreign exchange from the banking system for repatriation of capital and remittance of dividends/earnings that accrue on the registered investment.

On a gross basis, the BSP said registered foreign portfolio investments amounted to $399.5 million, comprising mainly of listed shares of $271.8 million (68 percent of the total), fixed-rate treasury bills or FXTBs amounting to $120.2 million or 30 percent.

The rest came in the form of investments in money market instruments amounting to $0.7 million and peso bank deposits of $6.8 million (combined two percent share).

Total inflows in November, however, were not enough to offset the amount of foreign portfolio investments that pulled out which totalled $798.5 million. Tetangco said these outflows were traced to withdrawals of investments in listed shares ($88 million), government securities ($135.4 million), money market instruments ($3.6 million) and peso bank deposits ($571.5 million).

As a result of continuing outflows, transactions resulted in a net outflow of $1.3 billion in 11 months this year, in sharp contrast to the nearly $3.7 billion net inflow for the comparable period in 2007.

“This reflected heightened risk aversion among investors with the effects of the global financial crisis having spread across mature and emerging economies,” Tetangco said.

By type of instrument, investments in listed shares posted a net inflow of $2.1 billion but placements in peso-denominated government securities, money market instruments and peso bank deposits showed net outflows of $110.8 million, $0.3 million and $3.3 billion, respectively.

On the whole, the BSP said January to November gross investment inflows amounted to $8 billion during the period, a 46-percent contraction from the $14.7-billion level recorded in the same period last year.

Investments in listed shares of almost $5.5 billion (48 percent of which were in telecommunications and property firms) represented 68 percent of the total and were 54 percent less than the 2007 figure. Similarly, investments in peso-denominated government securities of nearly $2 billion were down by 25 percent.

In contrast, investments in peso time deposits of $568.1 million and money market instruments of $4.9 million rose by 164 percent and 282 percent from their levels in 2007.

The United Kingdom, Singapore and the United States remained the top three investor countries, collectively contributing 70 percent of total investment funds during the period.

The BSP reported that gross capital outflows likewise dropped to an aggregate US$9.3 billion, or by 15 percent from last year’s $10.9 billion figure.

These came from withdrawals of investments from, listed shares (37 percent of total), government securities (22 percent), and money market instruments and peso bank deposits (combined 41 percent share).–Des Ferriols, Philippine Star