$4.2B in ‘hot money’ exits the Philippines in 2020 amid pandemic

Over $4 billion in foreign portfolio investments (FPI) left the Philippines last year amid the coronavirus pandemic.

“Hot money,” called as such for the ease by which these funds enter and exit an economy, yielded a net outflow of $4.24 billion in 2020, more than double the $1.9 billion net outflow logged in 2019, data from the Bangko Sentral ng Pilipinas (BSP) released Thursday evening showed.

This is the highest net outflow since at least 2012, based on available BSP data. The BSP had projected hot money to yield $2.8 billion net inflows for 2020.

“The net outflows may be broken down to net outflows in the following instruments: Philippine Stock Exchange (PSE)-listed shares ($3.3 billion); Peso government securities (GS) ($931 million); and other portfolio instruments ($22 million),” the central bank said.

BSP-registered FPI inflows dropped 30% to $11.678 billion in 2020, from $16.602 billion in 2019. Hot money outflows likewise slipped 14% to $15.918 billion in 2020 from $18.502 billion a year prior.

The central bank identified several developments that affected last year’s FPI flows, such as the pandemic’s impact on the global economy and the financial system, geopolitical tensions, corporate governance issues, and extended local and international restriction measures to curb the spread of coronavirus disease 2019 (COVID-19).

Across the world, COVID-19 has already sickened 102 million and killed more than two million. In the Philippines, COVID-19 confirmed infections reached 519,575 as of Thursday, with 33,427 active cases.

The United Kingdom, Singapore, United States, Luxembourg, and Hong Kong were the top sources for short-term foreign portfolio investments last year.

Short-term investments flowed into securities (80.5%) of property companies, holding firms, banks, food, beverage and tobacco firms and information technology companies. The remaining 19.5% were channeled into peso-denominated government securities, the BSP said.

In December alone, hot money posted net outflow of $523.86 million, 63.2% up from the $320.96 million net outflow from a year earlier. This is the biggest net outflow since the $1.006 billion recorded in May.

In a text message, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said there were usually less corporate fundraising activities in December, as businesses were on “holiday mode.”

December saw inflows drop 2.69% year-on-year to $1.084 billion while outflows rose 12% to $1.607 billion.

This year, the BSP is expecting hot money to yield a net inflow of $3.5 billion.

The outlook for short-term portfolio investments will continue to face uncertainties this year given the unresolved pandemic, said Security Bank Corp. Chief Economist Robert Dan J. Roces.

“The expected economic and corporate earnings recovery is seen to be supportive of risky assets, so flows should be better than last year,” he said in a Viber message.