PH reverses flow of ‘hot money’

More “hot money” flowed into the country, mostly investments in government securities, last October, resulting in a net inflow of foreign portfolio investments that month to reverse seven straight months of outflow.

Documents released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed that net inflow of foreign portfolio investments reached $27.8 million last month, a reversal of almost $324 million and $179.9 million in net outflow a month ago and a year ago, respectively. Net inflow meant more investments in bonds, deposits and stocks entered than left domestic markets.

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

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

Last October, total inflow amounted to $1.65 billion, the highest in four months. Outflow, meanwhile, reached $1.62 billion, the lowest in three months, BSP data showed.

“Inflows were more into the government securities market. That would explain the net inflows in October,” BSP Deputy Governor Diwa C. Guinigundo said in a text message to reporters.

In a statement, the BSP said registered portfolio investments that month jumped by a fourth to $1.6 billion from a month ago’s $1.4 billion on the back of renewed investor interest in government securities, although the year-ago figure was higher at $1.8 billion.

According to the BSP, 68.6 percent of the “hot money” that came in at the start of the fourth quarter were in Philippine Stock Exchange-listed securities, 31.2 percent in peso-denominated government securities and 0.3 percent in other peso debt instruments.

“Transactions in peso government securities and other peso debt instruments yielded net inflows of $163 million and $5 million, respectively, while those for PSE-listed securities resulted in net outflow of $140 million” last October, the BSP said.

Investors from Belgium, Japan, Singapore, United Kingdom and United States contributed a combined 78.2 percent of the “hot money” inflow that month, while the US remained the top destination of outflows with a 73.2-percent share.

The BSP explained that the seven previous months of outflows since March were mainly due to “concerns on the possible liftoff of interest rates in the United States, the slowdown of the Chinese economy, and profit-taking.”

At the end of the first 10 months, the Philippines posted a net outflow of $360.4 million, smaller than the $1.1-billion net outflow in the same period last year.

End-October inflow hit $17.6 billion, while outflow totaled almost $18 billion.