‘Hot money’ inflows down 46%

Registered foreign portfolio investments entering the country’s financial system declined sharply in August because of “hesitancy to invest” during a period viewed by some traditional Chinese businessmen as inauspicious for monetary undertakings.

In a statement, the Bangko Sentral ng Pilipinas said the so-called “hot money” level—called thus because they could move in and out of the financial systems rapidly—amounted to only $936 million in the eighth month of the year.

This represented a 46.7-percent drop compared to year-ago level, and also a less steep but still significant 34.7-percent decline from July 2017 figures.

“Trading is thin during the ‘ghost month’ because of hesitancy to invest,” the BSP said referring to the month-long Chinese festival to honor departed relatives when superstitious investors refrain from signing contracts or parting with money.

The central bank, however, did not explain why it attributed the year-on-year drop in portfolio investments to the ghost month market slowdown given that the latest figure was being compared to the same month last year—also a ghost month.

Philippine Stock Exchange-listed securities accounted for 84.9 percent of investments registered during the month, particularly stocks of banks, holding firms, food, beverage and tobacco firms, property firms and transportation companies.

The balance of 15.1 percent went to peso-denominated government securities.

Transactions in PSE-listed stocks yielded net inflows while investments in government bonds and other peso-denominated debt instruments resulted in net outflows. This meant investors were bullish on local stocks during the period, while being bearish on local bonds.

The $994 million in outflows for August was lower by 19.1 percent and 25.3 percent than the $1.2 billion and $1.3 billion recorded in the previous month and in August 2016.

Transactions for the month resulted in net outflows of $58 million, representing a reversal from the $206 million in inflows realized in July 2017.

Apart from the previously mentioned “ghost month” phenomenon, the BSP said investors also reacted to rising geopolitical tension between the US and North Korea, mixed second quarter corporate earnings, the antidrug campaign of the Duterte administration, and alleged anomalies at the Bureau of Customs.

Year-to-date transactions resulted in net outflows of $319 million.