Portfolio capital, more known as “hot” or speculative money, flowed out on net basis in October, spooked in part by above target inflation and its corrosive impact on profits, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.
Flighty foreign capital actually flowed inward the previous two months but apparently, foreign fund managers cannot risk exposing themselves to a down cycle that potentially eats up earnings in an environment where some of their tax privileges may be taken away again at any moment.
According to the BSP, far more withdrawals aggregating $1.184 billion than placements of only $743 million were posted in September that resulted to capital flight totaling a little over $440 million.
This represented a turnaround from yearago net inflows of some $113 million, based on BSP data.
The net portfolio outflows in September helped mute the nine-month portfolio inflows to only $161.71 million as gross inflows aggregated $11.460 billion while gross outflows stood at $11.299 billion.
Nevertheless, the net inward flow of portfolio funds over nine months this year is a reversal from the year-ago performance when gross inflows totaled only $11.991 billion versus gross outflows of $12.197 billion.
As a result, last year’s portfolio fund flows over nine months registered as a capital outflow totaling $206.25 million.
“This may be attributed to investors’ continuing concerns on trade tensions between the United States and China, the weakening of the Philippine peso and the continued uptick in inflation,” the BSP said.
“About 85.7 percent of investments registered during the month were listed securities in the Philippine Stock Exchange (pertaining mainly to holding firms, banks, property companies, food, beverage and tobacco firms and telecommunication companies).
“The balance went mostly to peso government securities (GS) (14.3 percent). Net outflows were noted for all investment instruments; [i.e. PSE-listed securities ($351 million), Peso GS ($89 million), other Peso denominated debt instruments (less than $1 million).]