PH posts $112.6-million net inflow of ‘hot money’ in September

Foreign portfolio investments swung to a net inflow of $112.63 million in September as investors looked forward to the passage of the first tax reform package pending in Congress, even as more “hot money” left the country than came in during the first nine months mainly due to developments overseas.

The latest Bangko Sentral ng Pilipinas data released Thursday showed that $1.297 billion in portfolio investments were registered last month, exceeding the $1.184 billion in outflows.

The September net inflow reversed the net outflows of $57.52 million in August and $807.15 million during the same month last year.

The inflows of hot money in September were up 38.5 percent from August’s $936.28 million as well as 1.8-percent higher than September last year’s $1.274 billion.

“This may be attributed to investor reaction to the extension of the debt limit deadline in the United States, and the Philippine Senate’s approval of the first package of the government’s tax reform program,” the BSP explained.

The Senate version of the first out of five tax reform packages, aimed at slashing personal income tax rates while jacking up taxes on consumption, was introduced last month, and is expected to be approved in a consolidated form with the Lower House-approved bill for President Duterte’s approval before yearend.

“About 80.9 percent of investments registered during the month were in Philippine Stock Exchange-listed securities (pertaining mainly to holding firms, property companies, banks, casinos and gaming firms, food, beverage and tobacco companies); 18.7 percent went to peso government securities (GS), and the 0.4 percent balance to peso time deposits (PTDs). Transactions in PSE-listed securities resulted in net outflows of $42 million, while investments in peso GS and PTDs yielded net inflows of $150 million and $5 million, respectively,” the BSP said.

Almost four-fifths or 79.4 percent of foreign portfolio investment inflows that month came from Luxembourg, Norway, Singapore, the United Kingdom and the US.

The net money outflows in September, meanwhile, were 19.1-percent higher than the $993.8 million in August but 43.1-percent lower than the $2.081 billion posted in September last year.

The US was still the top destination of outflows, cornering 79.1 percent of the total remittances.

As of end-September, however, foreign portfolio investment stood at a net outflow of $206.25 million, as the $12.197 billion in outflows surpassed the $11.991-billion inflows.

The year-to-date net outflow was a reversal of the $1.267-billion net inflow during the first nine months of last year.

Both inflows and outflows from January to September were also below the $13.747 billion and $12.48 billion, respectively, recorded a year ago.

The BSP blamed “certain domestic and international developments (including the interest rate hikes by the US Federal Reserve, global terrorist attacks, North Korea’s nuclear missile testing and the closure order for several mining companies in the country) earlier in the year” for the net outflow of hot money as of September.

Foreign portfolio investments are in the form of placements in publicly listed shares, government and private sector IOUs, and deposit certificates.

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