Hot money flees RP in February as net outflow hits $199 million

MANILA, Philippines – Hot money fled the country last month as the Bangko Sentral ng Pilipinas (BSP) reported a net outflow of $199 million in foreign portfolio investments, reflecting more caution among investors amid a deepening global slowdown.

The BSP reported that registered foreign portfolio investments recorded a net outflow of $198.7 million in February, a reversal from the $221.4-million net inflow in January.

The February outflow brought the cumulative total far this year to a net inflow of $22.6 million, down by 79 percent from the $105.9-million net inflow in the comparable period in 2008.

BSP Governor Amando M. Tetangco Jr. said portfolio investors are getting finicky over the expected impact of the stimulus program in the US and whether it had enough to prevent an economic depression.

“Some reservations on the effectiveness of the US economic stimulus package and concerns over the continued weakening of major economies have increased risk aversion among investors,” Tetangco said. “This caused a decline in inflows to emerging markets including the Philippines.”

On a gross basis, the BSP reported that registered foreign portfolio investments totaled $196.9 million and consisted of placements in listed shares amounting to $164.5 million, which accounted for 84 percent of gross inflows.

The BSP said there are also inflows into government securities of $31.6 million which represented 16 percent of total gross inflows and peso bank deposits amounting to less than $1 million and accounting for less than 1 percent of inflows.

But the BSP reported that gross inflows were wiped out by outflows that amounted to $395.6 million and largely from withdrawals of investments in listed shares ($84.4 million or 21 percent of total outflows), government securities ($6.3 million or 2 percent) and peso bank deposits.

The BSP said the withdrawal of peso bank deposits included the proceeds of matured portfolio investments and earnings temporarily parked in interim peso deposit (IPD) accounts ($302.6 million or 77 percent) pending reinvestment/outward remittance.

On the other hand, the BSP said immediate remittance of cash dividends, profits and earnings (i.e., not parked in IPD accounts) totaled $2.3 million (less than one percent).

Because of the net outflow in February, the two-month net inflow dropped to $22.6 million, 79 percent lower than the $105.9 million net inflow in the comparable period in 2008 due to continued risk aversion. 

By type of instrument, investments in listed shares and in peso-denominated government securities posted net inflows of $391.9 million and $186.3 million, respectively.

Also during the two-month period, the BSP said placements in money market instruments and peso bank deposits showed net outflows of $0.1 million and $555.5 million, respectively.

Gross investment inflows totaled $698.9 million during the two-month period,  a 70 percent contraction from over $2.3 billion gross inflow posted last year.  The BSP reported that investments in PSE-listed shares amounted to $485.6 million, representing a 60 percent decline compared with $1.2 billion in 2008.  Similarly, investments in peso-denominated government securities of $212.6 million (30 percent) dropped by 74 percent from the corresponding 2008 level of $808.1 million.

The BSP said the United Kingdom, Singapore, The Netherlands and the United States were the top investor countries and collectively contributed 83 percent of total investment funds during the period.

Because inflows were dramatically smaller this year, gross capital outflows were also smaller than the previous year, amounting to $676.3 billion, or lower by 70 percent from last year’s over $2.2 billion figure.

The BSP said withdrawals came from investments from listed shares (14 percent of total), government securities (four percent), and money market instruments and peso bank deposits (combined 82 percent share) and remittances of cash dividends, profits and earnings (less than one percent).– Des Ferriols, Philippine Star