Hot money reverts to $478-M inflow in 7 months (Philippine Star)

MANILA, Philippines – The Philippines managed to sustain the inflow of foreign portfolio investments or “hot money” in the first seven months of the year despite the pullout of foreign funds over the past five months due to external shocks.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed a net inflow of $478.29 million from January to July this year, a complete reversal of the net outflow of $1.09 billion in the same period last year.

Foreign funds that were invested mainly in securities listed at the Philippine Stock Exchange (PSE) went up 10.6 percent to $13.47 billion in the first seven months of the year from $12.18 billion a year ago.

On the other hand, outflows of hot money declined 2.2 percent to $12.99 billion from $13.28 billion.

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

For July alone, the Philippines recorded a net outflow of $160.1 million, a complete reversal of the net inflow of $321.81 million a year ago.

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Hot money that flowed inward fell 31 percent to $1.43 billion in July from $1.74 billion last year, while the outflow of foreign portfolio investments went up 12 percent to $1.59 billion from $1.42 billion.

About 75.4 percent of the investments registered last month went to PSE-listed securities primarily in holding firms, banks, property developers, food, beverage, and tobacco companies, and telecommunication providers. Peso-denominated government

securities accounted for 24 percent, while 0.6 percent went to other peso debt instruments.

The BSP said 80.2 percent of the inflows came from the United Kingdom, the US, Hong Kong, and Singapore, and Luxemburg, while 71.9 percent of the outflows went back to the US.

The Philippines recorded 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 last Tuesday.

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.