BSP: More ‘hot money’ flowed out in October

MANILA, Philippines–Foreign capital left the country for the second straight month in October, most of it going to the United States, according to data released by the central bank on Thursday.

This reflected investors’ reaction to news that the US Federal Reserve would turn off the stimulus tap that was flooding markets with tens of billions of freshly minted dollars every month.

Making matters worse were the weaker outlook for the global economy, and pro-democracy demonstrations in Hong Kong, which threatened the stability of one of the main financial centers in the region.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said net outflows of $179.85 million in foreign portfolio investments were recorded in October. The previous month, a total of $324.42 million flowed out of the country.

Portfolio investments are placed in local stocks, bonds and peso-denominated deposit certificates sold by banks.

The BSP said investors were shaken by the International Monetary Fund’s (IMF) downgrade of its 2014 forecast for the global economy, and “the continuing unrest” in Hong Kong.

In October last year, the Philippines reported net inflows of $969 million. The BSP said the outflows were brought on by “the end of the United States’ quantitative easing program.”

The US Fed last month halted its bond-buying program, also known as quantitative easing. At the program’s peak, the US Fed was buying $85 billion worth of mortgage-backed securities and US Treasuries from financial markets.

Quantitative easing was introduced in 2009 to prop up the US economy by pushing interest rates to record lows.

About 71.4 percent of the investments registered in October were in publicly listed securities—holding firms; banks; property companies; telecommunication firms; and utilities. The rest of investments, or 28.6 percent, were placed in government securities.