Portfolio investors continue to cash in

“Hot money” investors proved true to their name as more money left the country in June as a result of a deterioration in confidence in the Philippine economy, profit taking and volatility in global markets.

The Bangko Sentral ng Pilipinas (BSP) reported a net outflow in foreign portfolio investments for the fourth consecutive month in June. This continued to eat into the significant net inflows recorded in January and February.

In a statement, the BSP cited a host of factors that might have prompted foreign cash in and leave the Philippines.

These include the weaker-than-expected economic growth in the first quarter, disappointing corporate earnings, profit-taking by investors, and growing concerns on the looming interest rate hike in the United States.

More recently, the debt crisis in Europe may have also triggered heightened risk aversion among global investors, even though direct effects of a possible Greek exit from the euro zone on the Philippines would be minimal.

Net outflows in portfolio investments in June reached $522 million from $569 million the month before. June marked the fourth month of capital outflows from the Philippines, after starting the year with two strong months.

Despite the decline in June, the Philippines still had net inflows for the first semester. At $738 million, net inflows in January to June were better than the net outflows worth $1.3 billion recorded in the same six months in 2014.

Foreign portfolio investments come in the form of placements in publicly listed shares, government and private sector IOUs, and deposit certificates.

These portfolio investments are considered short-term bets—hence the nickname “hot money”—because these placements may be quickly pulled out.

Foreign direct investments, which usually take the form of capital expenditures for new factories and equipment, are seen as a more reliable indicator of investor interest in the country.

The bulk of “hot money” investments in June went to equities, the BSP said.

The US, the United Kingdom, Luxembourg and Hong Kong were the top sources of cash coming in. Meanwhile, 77.1 percent of the money that went  out was headed for the US.