‘Hot money’ flows turn positive

The flow of fast moving investments into the country registered a net decline in July of almost three-fourths, but remained positive compared to the large net outflows recorded in the two prior months, data from the central bank showed.

According to the Bangko Sentral ng Pilipinas, the country posted a net portfolio inflow of $53.29 million last month, on the back of $959.44 million inflows versus $906.15 million in outflows.

This is 74 percent lower than the $206.47 million in net inflows recorded in the same period last year which, the central bank noted, was marked by unusually high volumes of so-called hot money moving in and out of the local economy.

The positive figure in July 2018—albeit substantially lower than the number for the same month last year—may be attributed to investors’ “anticipation of good second quarter corporate earnings results,” the central bank said.

The United States, United Kingdom, Hong Kong, Singapore and Luxembourg were the top five investor countries for the month, with combined share of 84.8 percent.

The bulk of investments registered during the month went to Philippine Stock Exchange-listed securities, pertaining mainly to banks, property companies, holding firms, food, beverage and tobacco firms, and small and medium enterprises, while the balance went to peso-denominated government securities.

Net inflows were noted for transactions in PSE-listed securities ($51 million) and other peso-denominated debt instruments ($11 million), while those for government bonds resulted in net outflows ($9 million), the central bank said.

Outflows for the month of $906 million were lower by 36.5 percent and 26.2 percent, respectively, compared to those recorded in June 2018 ($1.4 billion) and July 2017 ($1.2 billion).

“The United States continued to be the main destination of outflows, receiving 78.7 percent of total remittances,” the BSP said.

Interest rates in the world’s largest economy have been on the rise—thus resulting in outflows from emerging markets like the Philippines—as the US Federal Reserve continues to unwind its quantitative easing scheme after a decade of ultra-loose monetary policy used to counter the effects of the 2008 global financial crisis.

The BSP noted that its monthly report on portfolio investment flows captured only those that were coursed through the banking system and excluded hot money movements coursed through other financial channels. Registration of inward foreign investments with the central bank is optional under the liberalized rules on foreign exchange transactions.