The same foreign funds would flee on net basis over the succeeding four months, totaling $739 million in March, $298.83 million in April, $749.84 million in May to only $36 million in June.

Portfolio funds exiting the country on gross basis accelerated by 25 percent in the first eight months to $12.39 billion, from only $9.94 billion last year, data from the Bangko Sentral ng Pilipinas (BSP) show.

This developed even as the gross flow of portfolio funds, more known as “hot” or speculative money, similarly speeded up during the period from $10.5 billion last year to $11.38 billion this year.

The acceleration translates to an 8.4 percent expansion from last year.

“The acceleration in gross portfolio outflows for the first 8 months of 2019 has to do with external risk factors, especially the increased global financial market volatility largely due to the lingering and escalation of the trade war between the US and China, the world’s second biggest economies,” Michael Ricafort, lead economist at RCBC, said.

The uncertainties “slowed global economic growth/outlook and also slowed global trade” such that China (world’s second biggest economy) posted the slowest growth in nearly 30 years.

“Brexit-related uncertainties that slowed down the economies of the UK, other European countries, and the major trading partners around the world such as China. Increased tensions with Iran also added to geopolitical risks that added to the volatility in the global financial markets,” Ricafort said.

The domestic factors include slower GDP growth in the first half, slowest in four years, largely due to government underspending brought about by the 3.5-month delay in the approval of the 2019 national budget in April.

For Carlo Asuncion, chief economist at Union Bank, the acceleration was expected.

“Foreign investors are always on the lookout for better yields. With the uncertainties that increasing trade protectionism has brought so far this year, investor sentiment trended towards safer assets and toward developed markets rather than emerging ones like the Philippines.

“The biggest factor domestically would be low economic growth in the first half of this year brought by the stalled 2019 national budget. Another would be the uncertainty on the impact of fiscal reforms such as the TRABAHO and other Conprehensive Tax Reform Program proposals. This points to how certain reforms are initially perceived to be disruptive but is actually favorable in the longer run,” he said.

According to BSP data, foreign funds essentially flowed inward in the opening months of the year when this totaled $762.82 million in January but substantially lower to only $339.57 million the following February.

The same foreign funds would flee on net basis over the succeeding four months, totaling $739 million in March, $298.83 million in April, $749.84 million in May to only $36 million in June.

Foreign funds would return to the Philippines on net basis the following July, but only barely, as this totaled only $15 million, BSP data show.

‘Portfolio outflows accelerated from January to August in 2019 versus previous year and yet the peso managed to stay resilient throughout, in stark contrast to the 2018 episode. Given that the current account deficit has widened further in 2019 vs 2018 and Foreign Direct Investments flows have also contracted, this may show that onshore dollar demand has declined as corporates are now more confident in the stability of the peso,” Nicolas Mapa, senior economist at the Manila unit of ING Bank, said.

He noted 2018 was not a great year for the peso, “at least in the first three quarters of the year, as investors focused on the widening current account deficit amidst a series of Fed rate hikes, the US-China trade war and a central bank adjudged by the market to be behind the curve.

“Even a series of aggressive rate hikes by the Bangko Sentral ng Pilipinas to the tune of 175 basis points was not enough to assuage the siege on the peso, which dropped as much as 5 percent with corporate and households scrambling to secure dollar holdings.

“The confluence of portfolio outflows, a current account deficit and an exorbitant surge in demand from locals for the dollar may have forced the peso to weaken in 2018,” Mapa said of the local unit that in 2018 weakened to only P52.661 per dollar from 2017 when it averaged higher to P50.403 per dollar.

“2019 offers a similar landscape with the US-China trade spat escalating to even higher heights, the Phl current account widening further while interest rate differentials have been maintained as BSP’s rate cuts have been met by similar easing by the Fed and other central banks.

“Meanwhile, flows from the financial account in 2019 appear to point to increased outflows as FDI struggles and foreign portfolio outflows have outweighed in flows. Perhaps we can tag an improved communication strategy from the BSP in 2019 that has helped calm market’s frayed nerves with policy moves, despite on the easing side, have led to peso strength and not

weakness. The relative calm in financial markets despite the global headwinds has provided an environment where corporates and households do not feel the need to rush to the exits and stock up on the greenback.