More ‘hot money’ left PH in October

The second week of October saw more “hot money” pulled out, reversing the previous week’s net inflow, Bangko Sentral ng Pilipinas data released Thursday showed.

During the week of Oct. 10-14, the foreign portfolio investment outflow of $535.62 million exceeded the $335.29-million inflow, resulting in a net outflow of $180.33 million.

The previous week posted a net inflow of portfolio investment worth $41.83 million.

The net outflow during the second week of the month narrowed the year-to-date hot money net inflow to $1.13 billion as the $14.43 billion in inflows were more than the $13.305 billion in outflows, a reversal of the $336.07-million net outflow posted a year ago.

“The second week of October saw a bloody session in Asian stock markets ahead of [the release of] the FOMC minutes and with US Federal Reserve officials striking hawkish tones. Expectations for a Fed rate hike picked up during the week,” Bank of the Philippine Islands economist Nicholas Antonio T. Mapa explained.

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

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

In September, the net outflow of hot money hit a 32-month high amid profit-taking among foreign investors coupled with less new investments due to a deadly blast in the President’s hometown as well as external uncertainty.

Last month, the Philippines posted an $807.2-million net outflow in foreign portfolio investment, the highest since January 2014’s net outflow of $1.8 billion.

“September was a particularly challenging month because people thought that the US Fed would adjust monetary policy, so there was a lot of uncertainty and global financial markets proved to be more volatile,” BSP Deputy Governor Diwa C. Guinigundo earlier explained.

Hence, “even the inflow of portfolio investments was affected” that month, he said.

It eventually resulted in a narrower balance-of-payments (BOP) position in September of $117 million. This was lower than the $682-million surplus a month ago as well as the $219-million surplus a year ago.

The surplus meant that the amount of dollars that entered the economy that month was more than the amount that left.

While monthly BOP surpluses have been posted since March, the September figure was the lowest so far this year. The BOP is a summary of all the businesses the country does with the rest of the world. BOP data are tracked closely to ensure that the supply of dollars in the economy remains ample to allow the government as well as businesses to transact with the rest of the world.

Sources of dollar income for the country include remittances from Filipinos overseas, sales from exports of goods and services as well as foreign investments and revenues from industries such as business process outsourcing (BPO) and tourism.