MANILA, Philippines – More foreign portfolio investments or "hot money" were pulled out of the Philippines in August as investors cashed in on their profits.
Foreign portfolio investments are also known as "hot money" since these are speculative capital flows that move very quickly in and out of markets.
The Bangko Sentral ng Pilipinas (BSP) reported on September 9 that foreign portfolio investments yielded a net outflow of $542.52 million in August, a complete reversal of the net inflow of $483.45 million in the same period last year.
Net inflows create excess cash for managers to invest, like demand for securities such as stocks and bonds. Net outflow, meanwhile, is a scenario wherein more money is going out of an organization.
Hot money inflows into the Philippines fell 46% to $1.11 billion in August from $2.07 billion in the same month last year. Outflows inched up by 4.7% to $1.66 billion from $1.58 billion. BSP said outflows grew due to profit taking.
About 88.7% of investments registered in August were in listed securities at the Philippine Stock Exchange (PSE), particularly in holding companies, banks, property developers, telecommunication providers, as well as food, beverage, and tobacco firms.
On the other hand, about 10.8% of the inflows last month were invested in peso-denominated government securities.
BSP added that the rest of the investments were in peso time deposits and other peso debt instruments.
In August, the BSP said foreign portfolio investments in PSE-listed securities yielded a net outflow of $323 million, followed by peso-denominated government securities with $220 million, and peso time deposits and peso debt instruments with $4 million.
Only transactions in peso time deposits last month yielded a net inflow of $4 million.
The BSP said 82.3% of the inflows came from the US, United Kingdom, Singapore, Luxemburg, and Hong Kong. 81.4% of the outflows went back to the US.
Foreign portfolio investments yielded a net outflow of $64.25 million in the first 8 months of the year from a net outflow of $572.83 million.
Inflows inched up by 2.6% to $14.59 billion from January to August this year, compared to $14.22 billion in the same period last year. Outflows retreated by almost 1% to $14.65 billion from $14.79 billion.
The Philippines booked a net inflow of foreign portfolio investments amounting to $1.19 billion in February serving as a buffer for the net outflows registered in March, April, May, June, July, and August.
The BSP said the imminent interest rate hike by the US Federal Reserve (US Fed) continued to weigh down on investor sentiment.
The central bank also cited the debt crisis in Greece and the recent global stock market rout starting in China, including the decision of the People’s Bank of China to devalue the Chinese yuan.
It would be recalled that funds shifted back to the US as tapering of the quantitative easing program by the US Fed started in early 2014.
Emerging markets and economies like the Philippines served as safe havens for investors following a downturn in the US economy and the Euro area. – Rappler.com