Foreign funds flowed out in Q1, says BSP

More foreign funds went out than came in during the first quarter, due mainly to the tapering of the stimulus program in the United States that reduced the amount of money flowing into emerging-market assets, including peso-denominated stocks and bonds.

The net outflow in the first three months of 2014 stood at $2.296 billion, a reversal from the $1.087-billion net inflow in the same period last year, the Bangko Sentral ng Pilipinas reported Thursday.

Gross inflow amounted to $4.896 billion, dwarfed by the gross outflow of $7.192 billion, BSP data showed.

“[The outflow] was a result of the tapering of the quantitative easing (QE) program in the United States,” the BSP said in a statement.

In March alone, foreign “hot money” recorded a net outflow of $91.51 million.

This, nonetheless, was much smaller than the net outflow of $395 million in the same month last year, when concerns over the economic woes of the euro zone gripped markets worldwide.

Gross inflow in March amounted to $2.128 billion, while gross outflow hit $2.219 billion.

The flight of portfolio capital in the first quarter, which was also experienced by other emerging markets, was blamed by government economic officials on overreaction to the developments in the United States.

The tapering of the stimulus program, which comes in the form of bond purchases by the US Federal Reserve, was prompted by expectations that the American economy was improving.

Because part of the proceeds of bond purchases usually spill over to emerging markets in the form of portfolio investments, the tapering was expected to lead to a substantial decline in demand for, and thus value of, emerging-market assets.

Such speculations prompted some fund owners to dump emerging-market assets and purchase dollar-denominated ones.

Portfolio outflow also caused the peso to depreciate during the period.

The local currency, which hovered in the 43-to-a-dollar territory in the latter part of last year, weakened to the 45 level earlier this year before partly recovering to the 44 mark.

The BSP said the main sources of foreign portfolio inflows to the Philippines were the United Kingdom, Singapore, Malaysia and Luxembourg.

Funds going out of the Philippines, on the other hand, headed for the United States.