July net ‘hot money’ inflows surge 143%

Renewed interest by overseas investors in Philippine government securities and a large initial public offering on the local stock market boosted so-called “hot money” transactions in the country in July, the Bangko Sentral ng Pilipinas reported Friday.

The central bank said last month’s foreign portfolio investments yielded overall net inflows of $1.1 billion, representing a 143-percent increase from the $451 million in inflows reported in June.

“This was also a major turnaround from last year’s $160 million in net outflows,” the BSP said.

Hot money investments, thus called because they can move rapidly in or out of local financial markets, are funds from abroad used to acquire short-term positions in Philippine Stock Exchange (PSE)-listed shares, government bonds or the domestic money market. Their movement contributes significantly to foreign exchange fluctuations and are an indicator of investor sentiment toward local markets.

According to the BSP, registered investments for the month reached $2.3 billion, 25.4-percent higher than the $1.8 billion in June and by 58.6 percent from $1.4 billion a year ago.

“This was mainly due to an initial public offering by an industrial company as well as renewed interest in peso-denominated government securities,” the central bank said, referring to last month’s P25-billion IPO of cement manufacturer Cemex Holdings Philippines Inc.

Outflows for the month declined by 11.5 percent from $1.4 billion in June 2016 and by 24.4 percent from last year’s $1.6 billion.

The BSP said that year-to-date transactions yielded overall net inflows of $1.6 billion, despite profit-taking, concerns about the slowdown of the Chinese economy and the decline in global oil prices.

“The figure is more than three times the $478 million recorded for the same period last year when cumulative net inflows dropped from the $1.8 billion level recorded for January and February 2015, mainly due to profit-taking and growing concerns on the then looming interest rate adjustment in the United States,” it added.