‘Hot money’ continues to leave PH

Foreign capital left the Philippines as investors divested from stocks, bonds and deposits, Bangko Sentral ng Pilipinas (BSP) data showed, amid fears that Philippine securities have become expensive.

Net outflows in foreign portfolio investments or “hot money” were recorded for the third consecutive month in May. It was the worst month for portfolio investments in nearly a year.

Weak global economic conditions led to heightened risk aversion among international investors while lackluster growth and downbeat corporate profits turned off fund managers from the Philippines market. A slowdown in the number of new listings on the local stock exchange was also noted in May.

In May, hot money net outflows, which mean more investments left the country than what went in, reached $569 million, worse than the $31 million in April. Hot money net inflows of $545.08 million were recorded in May 2014.

“This development may be attributed to profit-taking and outward remittance of sales proceeds of investments in listed stocks and peso government securities,” the BSP said in a statement. Proceeds from these divestments, which may have been made prior to May, were kept in the interim in local banks.

Foreign portfolio investments, referred to as “hot money,” are placements in local stocks, bonds and deposit certificates. These investments indicate how attractive a country is to fund managers and reflect the health of the domestic economy.

These portfolio investments are considered short-term bets—hence the nickname “hot money”—because these placements may be quickly pulled out.

Foreign direct investments, which usually take the form of capital expenditures for new factories and equipment, are seen as a more reliable indicator of investor interest in the country.

The United Kingdom, United States, Singapore, Hong Kong and Belgium were the top five investor countries for the month, with a combined share of the total of 77 percent. The United States continued to be the main destination of outflows, receiving 76.6 percent of the total.

For the five months ending May, investments remained positive, with net inflows reaching $1.16 billion. This was a reversal from net outflows of $1.42 billion in the same five-month period the year before.