Net ‘hot money’ inflows hit $592M in January

The Philippines started off the year on the right foot in terms of attracting foreign cash, as “hot money” flows in January hit the highest level in more than a year.

Growth in portfolio investments was fueled by the country’s active stock market and bright economic prospects.

The rise in investments in local stocks, bonds and deposit certificates in January was in contrast to record-high outflows recorded in the same month last year, which was brought about by heightened risk aversion in global markets.

“It will be noted that net outflows were recorded a year ago due to the effects of the United States quantitative easing (QE) program tapering,” said the Bangko Sentral ng Pilipinas (BSP), which reports data on investments monthly.

Net inflows of foreign portfolio investments rose to $592 million in January from $397 million in December of last year.

In January 2014, net outflows of $1.8 billion were recorded as money left the country amid jitters over the tapering of the US Federal Reserve’s monetary stimulus for the US economy.

Apart from the country’s stable macroeconomic fundamentals, major transactions in the local stock market gave investors more reasons to plunk cash in the Philippines.

The BSP said share sales by two holding firms and a local bank helped attract fresh capital. Late in January, Gokongwei-led JG Summit raised P8.8 billion from the stock market through the sale of new shares to investors.

Data on portfolio investments can serve as a proxy for how the state of the economy is perceived abroad.

These flows earned their nickname “hot money” to describe the speed at which investors can come in and go out of the country.

Gross investments rose 71.9 percent year-on-year to $2.2 billion in January. Total outflows, meanwhile, fell by half to $1.6 billion, the BSP said.

The BSP said most of the outflows went to the United States as the American economy began to show signs of recovery.