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Hot money outflows accelerate in Nov.

by December 15, 2016 General

Posted on December 16, 2016

FOREIGN capital headed for the exits in November at a rate nearly nine times the outflows seen a year earlier, the central bank said, with heightened market jitters largely due to the surprise victory of Donald J. Trump in the United States presidential election.

Foreign portfolio investment, also called “hot money” given the ease by which such funds enter and leave an economy, posted a $607.31-million net outflow for the month, turning around from a $59.87 million inflow seen in September and much more severe than the $68.79-million net outflow seen in November 2015.

In a statement, the Bangko Sentral ng Pilipinas attributed the bigger amount of outbound capital to the “unexpected result” of the US presidential elections, coupled with the widely anticipated interest rate hike by the Federal Reserve.

Mr. Trump, the Republican candidate, won the Nov. 8 election, defying market expectations.

The Fed eventually decided to hike interest rates by 25 basis points during its Dec. 13-14 review, noting signs of an economic recovery while bracing for the possibility of an expansionary fiscal program by Mr. Trump.

In the Philippines, weak corporate earnings for the third quarter also drove out hot money investments last month, the central bank said.

The government reported a 7.1% rise in economic growth during the third quarter, making the Philippines the second fastest-growing economy in Asia.

Foreign firms placed a total of $1.19 billion worth of investment in November, the lowest in nine months although slightly higher than the $1.086-billion inflows logged a year earlier. However, this was negated by $1.797 billion in capital that was pulled out, up from $1.154 billion in November 2015.

Still, the year-to-date tally was net positive at $672.73 million, reversing a $473.41-million outflow during the comparable period last year, propped up by big-ticket investments that came in during the first half.

Nearly all of the hot money flows were used to acquire shares of stock in publicly listed companies, particularly utility firms; holding companies; property firms; banks; and food, beverage and tobacco companies. Meanwhile, a 10th went to peso-denominated debt paper issued by the national government, which resulted in outflows.

For the month, the biggest investment sources were the UK, US, Singapore, Malaysia, and Luxembourg making up 76.3% of the total. Meanwhile, the US remained the main destination of outflows, receiving 82.2% of the total.

The central bank expects $1.1-billion worth of net outflows for hot money as of its June estimate, although new forecasts are set to be announced today. — Melissa Luz T. Lopez