More foreign funds pull out in Sept

By Lawrence Agcaoili (The Philippine Star), October 14, 2016

MANILA, Philippines – More than $2 billion worth of foreign portfolio investments or “hot money” were pulled out from the Philippines in September amid the uncertainties brought about by the impending interest rate hike in the US and the increasingly worrisome presidential pronouncements that add to investor jitters.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed total outflows reached $2.08 billion in September, 23 percent higher than the $1.69 billion withdrawn in the same month last year.

This was the highest monthly withdrawal since June last year when $2.21 billion worth of foreign portfolio investments were pulled out by investors from the economy.

Inflows declined 7.3 percent to $1.27 billion in September from $1.37 billion in the same month last year due to negative investor sentiment, lingering uncertainty on the timing of the next interest rate hike in the US, the bombing in Davao, and the decision of the European Central Bank to discontinue its bond-buying program.

This translated to a net outflow of $807.15 billion last September, 150 percent higher than the $323.98 million net outflow booked in the same month last year. This was the highest since the Philippines booked a net outflow of $1.84 billion in January 2014.

The BSP traced the outflows in September to profit taking. Foreign portfolio investments or hot money are referred to as speculative funds controlled by investors who actively seek short-term returns and high interest rate investment opportunities.

Foreign funds have been moving out of the Philippine Stock Exchange (PSE), while the peso has continued to weaken due to external shocks brought about by the timing of the interest rate hike in the US as well as developments in the country.

The peso emerged as the worst performing currency in the region after shedding four percent in September alone, breaching the 48 to $1 level.

The Duterte administration declared a “state of lawless violence” after 15 people were killed in an explosion in Davao City last Sept. 2.

Likewise, President Duterte launched tirades against US President Barack Obama, UN Secretary General Ban Ki-moon, and the European Union for meddling into the government’s all-out war against illegal drugs.

Statistics showed about 88.7 percent of the investments registered in September were in PSE-listed securities particularly holding companies, property firms, banks, telecom providers, as well as food, beverage, and tobacco firms.

On the other hand, 11.3 percent went to peso government securities. Major sources of foreign portfolio investments include the United Kingdom, US, Singapore, Malaysia, and Luxemburg.

For September, about $654 million were pulled out from the PSE, $163 million from peso government securities, and less than $1 million from other peso debt instruments. About 76.7 percent of the total outflows went to the US.

The Philippines booked a net inflow of $1.27 billion in the first nine months, reversing a net outflow of $413.93 million in the same period last year.