Rising US yields drew ‘hot money’ away from PH in ’17

The strong foreign portfolio investment inflows of 2016 swung to outflows last year, as investors in stocks and bonds were attracted by rising returns overseas and put off by weak prospects of local mining stocks, according to the Bangko Sentral ng Pilipinas.

In a statement, the BSP said portfolio investments—also called “hot money” due to their tendency to move rapidly in and out of markets depending on short-term developments—ended 2017 with $205 million in net outflows.

This marked a sharp reversal from the net inflows of $404 million in the previous year.

The central bank said the pace of outflows had slowed toward the end of 2017 amid favorable fiscal developments.

“While net outflows were noted starting in the first quarter of the year ($568 million) attributable to international and domestic developments (such as the interest rate increases in the United States, and the closure order for several mining companies in the country), the figure has subsequently declined as investors reacted positively to the various developments in the country, including the approval of the first phase of the tax reform program of the government,” it said.

According to latest data, registered foreign portfolio investments for 2017 reached $16.1 billion, 8.9 percent lower than the $17.6 billion a year ago.

On a monthly basis, the lowest gross inflow was recorded in August ($936 million) while the peak was noted in June ($2 billion). On a quarterly basis, the largest inflow was noted in the second quarter at $4.8 billion, representing 30 percent of the total for the year.

“This may be attributed to positive investor sentiment arising from the World Bank’s view that the Philippines will continue to be a top performer in the region, and the conflict resolution in Marawi City,” the central bank said. “These were further supported by accelerated net foreign buying as well as the approval by Congress of the first phase of the tax reform package.”