For­eign fund exit slows in Au­gust but pos­i­tive re­verse seen un­likely

MANILA— For­eign funds still mostly pulled out of lo­cal fi­nan­cial mar­kets in Au­gust, but losses were nar­rower than pre­vi­ous month even af­ter the govern­ment placed key eco­nomic cen­ters in brief lock­downs anew.

The Freeman - - Business - (Philstar.com)

For­eign port­fo­lio in­vest­ments posted a net out­flow of $453.17 mil­lion last month, nar­rower than the $235.38 mil­lion in pre­vi­ous month and $391.74 mil­lion same pe­riod last year, the Bangko Sen­tral ng Pilip­inas (BSP) said in a state­ment late Thurs­day evening.

How­ever, a net out­flow still in­di­cates that more in­vest­ments still left than en­tered the coun­try, a sig­nal in­vestor ap­petite re­mained strug­gling in the face of the health cri­sis. These place­ments are also known as “hot money” for the ease they en­ter or exit mar­kets at the slight­est sign of in­creased or de­creased risk for their money.

“(This is) brought about by un­cer­tain­ties due, among oth­ers, to the im­pact of the COVID- 19 pan­demic to the global econ­omy and fi­nan­cial sys­tem…,” the cen­tral bank said.

Luis Lim­lin­gan, man­ag­ing direc­tor at Regina Cap­i­tal bro­ker­age, said a swing back to pos­i­tive ter­ri­tory in the clos­ing months of 2020 re­main un­cer­tain. “It’s rather dif­fi­cult to say at this point since this year has been like any other in that sen­ti­ment has been in­flu­enced by a pan­demic and not fi­nan­cial in na­ture,” he said in a Viber mes­sage.

A re­turn to net in­flow is needed for BSP to beat its yearend fore­cast of $2.4-bil­lion net out­flows. From Jan­uary to Au­gust, hot money exit al­ready breached that level at $3.88 bil­lion, wider than $1.1 bil­lion same pe­riod a year ago.

Jonathan Rave­las, chief mar­ket strate­gist at BDO Uni­bank Inc., said bring­ing back con­fi­dence to both con­sumers and busi­ness will be key. “It will take the op­ti­mism on the re­open­ing of the econ­omy to turn it...Right now, it’s as if we’re still in a lock­down with­out suf­fi­cient public trans­port? How can you restart your econ­omy more ef­fi­ciently,” he said in a phone in­ter­view.

In­deed, in­vestors have turned against the govern­ment’s early pen­chant for lock­downs. In June, when Pres­i­dent Ro­drigo Duterte eased quar­an­tine con­trols in Metro Manila and neigh­bor­ing ar­eas like Cal­abar­zon, gross hot money in­flows rose to $1.02 bil­lion.

But by Au­gust, when Duterte placed the same ar­eas back to mod­i­fied en­hanced com­mu­nity quar­an­tine from Aug. 4-18, in­flows sank to just $666.51 mil­lion. That said, gross out­flows also dropped from $1.25 bil­lion in June to $793.27 mil­lion in Au­gust, data showed.

BSP said that apart from the pan­demic, for­eign i nvestors t urned away from Philip­pines due to the “geopo­lit­i­cal and trade ten­sions and cor­po­rate gover­nance is­sues in­volv­ing wa­ter con­ces­sion­aires” where Duterte threat­ened to uni­lat­er­ally re­voke ex­ist­ing state con­tracts with Manila Wa­ter Co. and Mayni­lad Wa­ter Ser­vices Inc.

A to­tal of 84.3% of in­vest­ments last month flowed to the stock ex­change, mainly to listed hold­ing firms and com­pa­nies in the prop­erty, bank­ing, food and bev­er­age, to­bacco and telecommun­ication sec­tors. The bal­ance of 15.7% was in­vested in lo­cal govern­ment bonds.

By coun­try of ori­gin, in­vest­ments mainly came from the UK, Sin­ga­pore, the US, Hong Kong and Lux­em­bourg, which cor­nered 82.6% of in­flows last month, fig­ures showed.

For the first 8 months, both gross in­flows and out­flows were also down from last year to $7.08 bil­lion and $10.97 bil­lion, re­spec­tively.

PHILSTAR.COM

For­eign port­fo­lio in­vest­ments posted a net out­flow of $453.17 mil­lion last month, nar­rower than the $235.38 mil­lion in pre­vi­ous month and $391.74 mil­lion same pe­riod last year, the BSP re­ported.

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