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More than $ 4 billion in foreign portfolio investment (FPI) left the Philippines last year amid the coronavirus pandemic.
The “hot money,” named for the ease with which these funds enter and exit an economy, yielded a net outflow of $ 4.24 billion in 2020, more than double the net outflow of $ 1.9 billion recorded in 2019, data of the Bangko Sentral ng Pilipinas. (BSP) released Thursday night showed.
This is the highest net outflow since at least 2012, based on available BSP data. The BSP had projected hedge money to generate net income of $ 2.8 billion by 2020.
“Net outflows can be broken down into net outflows in the following instruments: shares listed on the Philippine Stock Exchange (PSE) ($ 3.3 billion); Government securities in pesos (GS) ($ 931 million); and other portfolio instruments ($ 22 million), ”said the central bank.
FPI inflows reported by BSP fell 30% to $ 11.678 billion in 2020, from $ 16.602 billion in 2019. Hot money outflows also fell 14% to $ 15.918 billion in 2020 from $ 18.502 billion. a year before.
The central bank identified several developments that affected FPI flows last year, such as the impact of the pandemic on the global economy and financial system, geopolitical tensions, corporate governance problems, and extended local and international restriction measures to slow the spread. of coronavirus disease 2019 (COVID-19).
Worldwide, COVID-19 has already sickened 102 million and killed more than two million. In the Philippines, confirmed COVID-19 infections reached 519,575 as of Thursday, with 33,427 active cases.
The United Kingdom, Singapore, the United States, Luxembourg and Hong Kong were the main sources of short-term foreign portfolio investment last year.
Short-term investments flowed into securities (80.5%) of real estate companies, holding companies, banks, food, beverage and tobacco companies, and information technology companies. The remaining 19.5% was channeled to government securities denominated in pesos, the BSP reported.
In December alone, hot money posted a net outflow of $ 523.86 million, 63.2% more than the net outflow of $ 320.96 million the previous year. This is the largest net outflow since the $ 1.006 billion recorded in May.
In a text message, Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said there were generally fewer corporate fundraising activities in December as businesses were in “vacation mode.”
In December, inflows fell 2.69% year-on-year to $ 1,084 billion, while outflows increased 12% to $ 1,607 billion.
This year, the BSP expects hedge money to generate a net inflow of $ 3.5 billion.
The outlook for short-term portfolio investments will continue to face uncertainties this year given the unresolved pandemic, said Security Bank Corp. chief economist Robert Dan J. Roces.
“The expected recovery of economic and corporate earnings is seen to support risk assets, so flows should be better than last year,” he said in a Viber message.
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