PH sustains hot money inflows in 7 months

MANILA, Philippines — The Philippines sustained the inflow of foreign portfolio investments or “hot money" in the first 7 months of the year despite foreign investors pulling out funds due to external shocks.

The Bangko Sentral ng Pilipinas (BSP) said in a statement on Friday, August 14, that it recorded a net inflow of $478.29 million from January to July this year. This is a complete reversal of the net outflow of $1.09 billion in the same period last year.

Foreign funds increased by 10.6% to $13.47 billion in the first 7 months of the year from a year-ago level of $12.18 billion. These were invested mainly in securities listed at the Philippine Stock Exchange (PSE).

Hot money outflows, however, declined by 2.2% to $12.99 billion from $13.28 billion.

Foreign portfolio investments are also known as "hot money” as these are speculative capital flows that move very quickly in and out of markets.

The Philippines in July registered a net outflow of $160.1 million worth of foreign portfolio investments – a complete reversal of the net inflow of $321.81 million recorded in the same month a year ago. 

Hot money that flowed inward slid 31% to $1.43 billion in July, compared to $1.74 billion last year.

Foreign portfolio investments pulled out of the country went up by 12% to $1.59 billion from $1.42 billion.

BSP said that about 75.4% of the investments recorded last month were in PSE-listed securities primarily in holding firms, banks, property developers, food, beverage, and tobacco companies, and telecommunication providers.

About 24% were placed in peso-denominated government securities.

About 80% of the inflows, BSP said, came from the United Kingdom, the US, Hong Kong, and Singapore, and Luxembourg while 71.9% of the outflows went back to the US.

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, and July.

The BSP said the imminent interest rate hike in the US continued to weigh down on investor sentiment.

The central bank also cited the weaker-than-expected economic growth in the first quarter of the year, the debt crisis in Greece, and the stock market plunge in China.

Another major development was the decision of the People’s Bank of China to devalue to Chinese yuan on Tuesday.

It would be recalled that funds shifted back to the US as tapering of the quantitative easing program by the US Federal Reserve 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. –