The total outflow of foreign portfolio investments or “hot money” recorded in September came to a total of $367 inflow, substantially larger compared to the $86-million net outflows recorded in August 2022, data from the Bangko Sentral ng Pilipinas showed.
This resulted from the $1.3-billion gross outflows and $892-million gross inflows for the month.
China Bank Corporation chief economist Domini Velasquez said that hot money continues to flow out of the country as investors took on risk off attitudes against emerging markets like the Philippines.
“Relatively high-interest rates in advanced economies and perception that economies such as the US are ‘safer’ were behind the outflows. Moving forward, we expect continuous outflows until early next year as the Fed continues its monetary tightening path,” she added.
Added Velasquez, “Besides this, in periods of high-interest rates, stock markets generally go down. As a share of portfolio investments, investments in PSE-listed securities make up the majority of portfolio investments. Hence, we also see some outflow as the local bourse continues to weaken.”
Moreover, data has showed that the $892 million registered investments in September 2022 reflected an increase of 12.7 percent (or by $100 million) compared to the $792 million registered in August 2022.
PSE-listed securities
“Majority of investments registered, or 87.1 percent were in PSE-listed securities (investments mainly in electricity, energy, power & water; food, beverage & tobacco; property; banks; and holding
firms), while the remainder went to investments in peso government securities (12.9 percent) and other instruments (less than 1.0 percent),” according to Bangko Sentral ng Pilipinas data.
Investments for September came from Singapore, the United Kingdom, United States, Luxembourg and British Virgin Islands with combined share to total at 79.9 percent.
“The $1.3-billion gross outflows for the month were larger by 43.4 percent (or by $381 million) than the $878 million recorded in August 2022. The US received 72.5 percent of total outward remittances,” it added.
The BSP data also said that on a year-on-year basis, registered investments in September 2022 decreased by 25.0 percent (or by $297 million) from the $1.2 billion recorded in September 2021, while gross outflows were larger by 3.8 percent (or by $47 million) than the outflows recorded for the same period last year ($1.2 billion).
The $367-million net outflows in September 2022 were larger than the $24-million net outflows recorded in September 2021.
Authorized agent banks
“On a year-to-date transaction (January to 30 September) for foreign investments registered with the BSP through Authorized Agent Banks, it yielded net inflows of $222 million, a turnaround from the $459-million net outflows noted for the same period last year [January to September 30],” the BSP said.
Registration of inward foreign investments delegated to AABs by the BSP is optional under the rules on foreign exchange transactions.
It is required only if the investor or its representative will purchase FX from AABs and/or their subsidiary/affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment.
Without such registration, the foreign investor can still repatriate capital and remit earnings on its investment but the FX will have to be sourced outside the banking system.
“We have seen continued exit of hot money from listed equities and fixed income as the currency weakened over the last three months,” Michael Enriquez, president and chief investment officer of Sun Life Investment Management and Trust Corp. said.