Net inflow of ‘hot money’ hits 6-month high of $206.47 million in July

Bangko Sentral ng Pilipinas (File photo / Philippine Daily Inquirer)

A net inflow of hot money worth $206.47 million was posted in July, the highest in six months, partly on the back of investors’ positive reaction to President Rodrigo Duterte’s report on his first year in office, the Bangko Sentral ng Pilipinas (BSP) said Thursday.

BSP data showed that the $1.434 billion inflow of foreign portfolio investment exceeded the $1.228-billion outflow, resulting in a net inflow for the second straight month.

The net inflow of portfolio investment in July was the biggest since January’s $301.33 million.

However, the net inflow at the start of the second half was dwarfed by the $1.067-billion net inflow in July last year

The inflow registered in July also dropped 36.8 percent year-on-year and 28.9 percent month-on-month.

The hot money outflow, meanwhile, rose 2.1 percent year-on-year but declined 36.8 percent month-on-month.

The BSP attributed the higher inflows of foreign portfolio investment last month to “positive investor sentiment on news of inflation declining to 2.8 percent in June from 3.1 percent in May; strong net foreign buying; investor reaction to President Rodrigo R. Duterte’s second State of the Nation Address; and the US Federal Reserve’s decision to maintain interest rates.”

Of the registered investments in July, 90.5 percent were in Philippine Stock Exchange-listed securities (mostly banks, food, beverage and tobacco firms, holding companies, property firms as well as utilities), while the rest were invested in peso government securities, the BSP said.

“Transactions in PSE-listed securities yielded net inflows of $224 million, while investments in peso government securities resulted in net outflows of $18 million that month,” the BSP added.

In July, the top five sources of hot money were Luxembourg, Singapore, Switzerland, the United Kingdom and the United States with a 82.6-percent combined share to the total.

The US remained the top destination of hot money outflows, cornering 86.1 percent of the total.

But during the period Jan. 2 to Aug. 4, the year-to-date foreign portfolio investment figure remained at a net outflow of $204.24 million, a reversal of the $1.744-billion net inflow a year ago, which the BSP blamed on the following: “the US air strike against Syria, global terrorist attacks, interest rate increase by the US Federal Reserve, political turmoil in the US, and the closure order for several mining companies in the country.”

In June, the BSP retained its projection of a $900-million net outflow of 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. JPV