May ‘hot money’ inflows jump by 40%

MORE foreign portfolio investments or “hot money” entered the country than the amount that was brought out in May, reversing the net outflows registered a month ago and in May last year.

Bangko Sentral ng Pilipinas (BSP) data released on Thursday showed that in May this year, $1.78 billion in foreign portfolio investments flowed into the country— the highest inflow since May last year.

In the meantime, the $1.71 billion in hot money withdrawn in May was the biggest outflow since July last year. This resulted in a net inflow of $72.8 million.

Foreign portfolio investments come in the form of placements in publicly listed shares, government and private sector IOUs, as well as in deposit certificates. Portfolio investments are considered short-term bets—hence, the term hot money—because these placements can be pulled out quickly.

In a statement, the BSP attributed the 40.1-percent month-on-month and 12.3-percent year-on-year jump in registered portfolio investments to “large inflows in shares of a holding company and a universal bank, renewed interest in peso-denominated government securities and the relatively peaceful conduct of elections (in May).”

Outflows, meanwhile, rose by 5.1 percent month-on-month “due to profit-taking,” the BSP said, although outflows were down by 20.7 percent year-on-year.

The net inflows in May reversed the net outflows of $354.1 million in April, which was blamed on pre-election market jitters, as well as the $569.3-million net outflow in May last year.

BSP data showed that the first two weeks of May yielded net outflows— $172.4 million on the week of May 2-6 or before the elections and $84.8 million on May 9-13 or the week following Election Day.

The remaining two weeks and two trading days of May resulted in net inflows of $123.3 million (on May 16-20), $50.7 million (May 23-27), and $156 million (May 30-31).

In May, 83.3 percent of registered foreign portfolio investments were placed in Philippine Stock Exchange-listed securities (mainly of banks; food, beverage and tobacco companies; holding firms; property companies, and telecommunications firms), yielding net inflows of $46 million.

Peso government securities, meanwhile, saw net inflows of $27 million.

The top five sources of hot money in May were the Luxembourg, Singapore, Switzerland, the United Kingdom and the United States.

At the end of the first five months, inflows hit $6.6 billion while outflows reached $6.5 billion, resulting in a net inflow of $129 million.

The end-May net inflow was dwarfed by the $1.2 billion posted in the first five months of last year, as the BSP noted “profit-taking, concerns about the slowdown of the Chinese economy, and the decline in global oil prices” this year. Large inflows were recorded a year ago on the back of stock offerings of two holding companies, two universal banks and a property firm, the BSP said.