Local stocks drew large ‘hot money’ inflows in February

The flow of so-called “hot money” into the Philippine economy swung to positive in February reversing a large outflow in the same period last year, and boosting the year-to-date amount of fast-moving investments, most of which were channeled into the local stock market.

According to data from the Bangko Sentral ng Pilipinas, last month saw net portfolio investments of $339.7 million in the domestic financial markets by overseas investors. This compares favorably to the $528.5 million in outflows recorded in February of last year.

More importantly, last month’s performance boosted total inflows of portfolio investments to $1.15 billion in the first 12 weeks of 2019, representing a 41-percent improvement over the $811.7 million in net inflows for the same period last year.

“About 77.4 percent of investments registered during the month [of February] were in Philippine Stock Exchange-listed securities pertaining mainly to banks, holding firms, property companies, food, beverage and tobacco companies and transportation companies,” the BSP said.

Another 22.4 percent went to peso government securities and the 0.2 percent balance went to other peso debt instruments. The United Kingdom, the United States, Singapore, Luxembourg, and Norway were the top five investor countries for the month, with combined share to total at 67.0 percent.

Portfolio investments, sometimes called hot money because of the speed at which they move into or out of markets, refer to short-term investments often directed at stocks, debt securities or money market placements. They are an indicator of investor confidence in a particular economy as well as the attractiveness of particular investment instruments.

According to the central bank, registered investments for the month of February 2019 hit $1.4 billion, lower by 31.6 percent than the $2.1 billion recorded for January 2019.

Year-on-year, inflows of these portfolio investments rose by 34.9 percent compared to the level in the same period last year.

Outflows for the month ($1.1 billion) were lower compared to figures recorded for January 2019 ($1.3 billion or by 17.6 percent) and February 2018 ($1.6 billion or by 32 percent). The US continued to be the main destination of outflows, receiving 80.3 percent of total remittances.

On the overall, transactions for the month resulted in net inflows of $340 million, which may be attributed to investor optimism arising from developments on trade negotiations between the US and China and the passage of the Rice Tariffication Law, which is expected to help boost rice supply in the country and thereby temper inflation.

On a month-on-month basis, the figure is lower vis-a-vis the $763 million recorded for January 2019; while year-on-year it reflected an improvement from the $529 million net outflows for February 2018. Net inflows were noted for all investment instruments: PSE-listed securities ($175 million); peso-denominated government securities ($162 million); and other peso-denominated instruments ($3 million).