Net ‘hot money’ outflow hits $568M

Foreign portfolio investments left due to US rate hike, PH mining uncertainty

By: Ben O. de Vera, Philippine Daily Inquirer, Apr 22, 2017

The net outflow of so-called “hot money” reached $567.53 million during the first quarter and hit a four-month high in March as more foreign portfolio investment left the country due to the orders to close down or suspend a number of mining operations as well as rising domestic inflation.

At the end of the first three months, the $4.07-billion outflows of portfolio investment exceeded the $3.5-billion inflows, Bangko Sentral ng Pilipinas data released late Thursday showed.

“This is attributable mainly due to profit-taking and continued uncertainties arising from international and domestic developments such as the anticipated interest rate increase in the United States and the closure order for several mining companies in the country,” the BSP said in a statement.

As such, the net outflow posted as of end-March reversed the $395.99 million in net inflow a year ago.

To recall, Environment Secretary Regina Paz Lopez in February ordered the closure of 23 mining operations as well as the suspension of five others in 10 provinces.

A week later, Lopez also ordered the cancellation of 75 mineral production sharing agreements (MPSAs) entered into by the government with mining companies.

The interagency Mining Industry Coordinating Council (MICC) will undertake a three-month review of Lopez’s orders on top of the review of all other mining contracts across the country as mandated under the law.

During the month of March alone, the net outflow of foreign portfolio investment reached $459.86 million, the biggest monthly net outflow since the $607.31 million in November last year as well as reversing the net inflow of $482.43 million a year ago.

In March, the $1.83-billion outflows were more than the $1.37 billion in inflows.

The BSP attributed the inflows last March to “bargain-hunting after the much-anticipated interest rate increase by the US Federal Reserve and the BSP’s decision to maintain the interest rate on the overnight reverse repurchase facility at 3 percent” while the outflows were due to profit-taking and news about higher inflation (3.4 percent in March, from 3.3 percent in February and 1.1 percent a year ago).

“About 83.8 percent of investments registered in March were in Philippine Stock Exchange-listed securities (pertaining to mainly holding firms, banks, property companies, food, beverage and tobacco firms, and telecommunication companies). The balance were investments in peso government securities (14.9 percent) and unit investment trust funds (1.3 percent). Net outflows were recorded for PSE-listed securities ($320 million) and peso government securities ($158 million), while net inflows ($18 million) were noted for investments in UITFs,” the BSP said.

The top five sources of hot money last March were Belgium, Singapore, Switzerland, the United Kingdom and the US, which accounted for a combined 73.9 percent of the total. The US remained the top destination of outflows or 87.6 percent of the total.