‘Hot money’ swings to net outflow of $460.83 million in 1st half of 2017

Bangko Sentral ng Pilipinas. INQUIRER.net FILE PHOTO

MANILA — Despite a net inflow of hot money posted in June on the back of positive market sentiment, more foreign portfolio investment left the country at the end of the first half of 2017, resulting in a net outflow of $460.83 million.

Bangko Sentral ng Pilipinas data released Thursday showed that the $8.784-billion outflow of portfolio investment as of the end of June outpaced the $8.324-billion inflow.

The net outflow registered in the first half was a reversal of he $593.87-million net inflow during the same six-month period in 2016.

The end-June inflows were also less than the $8.509 billion a year ago, while the year-to-date outflows were higher than last year’s $7.915 billion.

In a statement, the BSP said the six-month net outflow was a result of “certain domestic and international developments, such as the US air strike against Syria, global terrorist attacks, interest rate increases by the US Federal Reserve, political turmoil in the US, and the closure order for several mining companies in the country.”

During the month of June, a net inflow of hot money worth $79.56 million was recorded, reversing the $24.35-million net outflow in May.

However, the net inflow in June was dwarfed by the $450.87-million net inflow during the same month in 2016.

Last month, inflows reached $2.016 billion, exceeding the outflows of $1.937 billion.

The June inflows rose 11.4 percent from a year ago’s $1.81 billion as well as jumped 35.8 percent from $1.485 billion a month ago.

The BSP attributed the higher inflows of foreign portfolio investment last month to “positive investor sentiment relative to the anticipated resolution of the conflict in Marawi City, accelerated net foreign buying, and approval by Congress of the first tax reform package.”

The Duterte administration’s proposed first tax reform package was approved by the Lower House before Congress went on sine die break last May. Meanwhile, the fighting between government forces and ISIS supporters in Marawi City that started also in May is still ongoing.

The outflows last June, meanwhile, climbed 42.5 percent from last year’s $1.359 billion as well as increased 28.3 percent from the previous month’s $1.509 billion “due to profit taking and investor reaction to the US Fed’s decision to increase interest rates,” the BSP explained.

In June, the BSP retained its projection of a $900-million net outflow of foreign portfolio investment by end-2017, more than double the $404.43 million posted in 2016.

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.  SFM