Net ‘hot money’ inflows reach 13-month high

The country sustained net inflows of foreign portfolio investments or so-called “hot money” for the second straight month in March, with a 13-month high of $482.4 million, Bangko Sentral ng Pilipinas (BSP) data released yesterday showed.

Separately, the Department of Finance’s chief economist said the country was expected to withstand volatility in portfolio flows—partly brought about by investors’ uncertainty ahead of the national polls to be held next month—amid strong economic fundamentals.

Last month’s net inflows exceeded the $57.7 million registered in February, as well as reversed the net outflows of $21.6 million a year ago.

The balance of hot money inflows over outflows was also the highest since the almost $1.2-billion net inflows recorded in February last year.

The cumulative net inflows at the end of the first quarter stood at almost $396 million, smaller than the $1.8 billion at end-March last year.

In March, inflows reached nearly $1.7 billion, 58.1-percent higher than the $1.1 billion last February but lower than the $2.1 billion a year ago.

The BSP attributed the month-on-month increase in portfolio investment flows to “renewed investor interest in government securities” while the year ago figure was higher due to major stock rights offerings of certain financial enterprises, it explained.

Hot money outflows also rose but at a slower pace of 19.4 percent to $1.2 billion in March from over $1 billion in February on the back of profit-taking, the BSP said.

Outflows last month were likewise lower than $2.1 billion a year ago.

The bulk or 72 percent of the foreign portfolio investments were poured into Philippine Stock Exchange (PSE)-listed securities, mainly in banks, holding companies, property firms, telecommunication companies, as well as food, beverage and tobacco firms.

In March, transactions in PSE-listed securities yielded net inflows of $77 million, while those in peso-denominated government securities had a higher $405 million.

The top five sources of hot money that month were Hong Kong, Singapore, Switzerland, the United Kingdom and the United States, with a combined share of 79.2 percent of the total.

The US remained the top destination of outflows, with an 82.3-percent share last month.

In an economic bulletin, Finance Undersecretary Gil S. Beltran attributed the volatility in foreign portfolio investment flows to uncertainty in local election results as well as global economic slowdown amid impending US Fed normalization of interest rates.

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

Last year ended with net foreign portfolio investment outflows almost doubling to $599.7 million from $310.2 million in 2014.

The BSP sees more hot money leaving the country this year, with net outflows of foreign portfolio investments expected to reach $1.3 billion.