Outflow of foreign funds seen easing

The exit of foreign funds from the stock market, partly due to the looming Fed rate hike, started to ease last month, Finance Secretary Carlos G. Dominguez III said Wednesday.

In a statement, Dominguez cited the Philippine Stock Exchange’s (PSE) latest weekly market report showing that “foreign outflows at the Philippine equities market have steadily fallen from September to date.”

According to Dominguez, the market selloff steadily declined between Sept. 5 and Oct. 4. “From P7.545 billion on Aug. 29, foreign selling in the equities market fell to P7.46 billion on Sept. 5, P4.263 billion on Sept. 12, P1.914 billion on Sept. 19, P763 million on Sept. 26, and P655 million on Oct. 4,” he said.

PSE data also showed that year-to-date foreign portfolio investment inflows remained in positive territory, with P9.424 billion in net foreign buying.

“Foreign investors have been selling more local stocks than usual in the past weeks owing in large part to the strengthening American dollar and expectations of an interest rate hike by the US Federal Reserve,” Dominguez said.

But “market volatility was not an isolated case in the Philippines as equities in other emerging markets have also come under similar pressures in recent weeks as investors started speculating on the chances of higher US interest rates in the near future,” he said.

As a whole, “investors remain bullish because our country’s macroeconomic fundamentals are solid and there has been no change at all in economic policies or thrusts under the new government,” according to Dominguez.

The latest Bangko Sentral ng Pilipinas data showed that for Sept. 1-23, the country recorded a $785.8-million net outflow of foreign portfolio investments.

A net outflow meant the hot money withdrawn were more than those that entered the country.

On a monthly basis, the country last posted a net hot money outflow in April, as investors were jittery ahead of the May 9 elections. Net inflows were recorded from May to August.

Year-to-date foreign portfolio investments nonetheless yielded a net inflow of almost $1.3 billion, as the $13.4-billion inflow outpaced the $12.1-billion outflow.

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.