‘Hot money’ net inflows reach $227M

MORE flighty foreign funds entered the country in November, marking the second straight month of net inflows of “hot money,”  the central bank said on Monday.

Bangko Sentral ng Pilipinas (BSP) data showed foreign portfolio investments — also known as “hot money” because of the ease by which these funds enter and exit the economy — posted a net inflow of $227 million in November.

However, this is less than the $439-million net inflows logged in October, but a reversal of the $354-million net outflows recorded in November 2019.

Foreigners invested $1.6 billion in November, but this was offset by $1.3 billion in withdrawn funds.

“The $1.6 billion registered investments for November reflected a 15.7% growth compared to the $1.4 billion recorded last month (or by $213 million),” the BSP said.

Majority or 68% of the BSP-registered foreign portfolio investments went to shares of listed companies, particularly banks, property developers, holding firms, food, beverage and tobacco companies, and retailers. Nearly a third went to investments in peso government securities.

The United Kingdom, Singapore, the United States, Hong Kong and Norway were the five biggest sources of hot money in November, with a combined share of 82%.

“Outflows for the month ($1.3 billion) were higher compared to the level recorded for October ($913 million) by 46.6% (or by $425 million), with the US receiving 74.7% of total outflows,” the central bank said.

The November tally brought the 11-month total to a net outflow of $3.7 billion, more than double the $1.6-billion net outflow during the same period in 2019.

The 11-month period saw $14.3 billion in gross outflows of hot money and $10.6 billion in gross inflows.

The central bank attributed the surge in hot money outflows this year to the continued impact of the coronavirus disease 2019 (COVID-19) pandemic on the global economy and financial system.

The BSP also cited “geopolitical tensions, certain corporate governance issues and extended quarantine measures in select regions in the country.” Metro Manila and nearby provinces remain under a general community quarantine until Dec. 31, although President Rodrigo R. Duterte was expected to announce new quarantine classifications on Monday evening.

The BSP expects hot money to yield net inflows worth $2.4 billion this year and $3.5 billion by 2021, respectively.

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