‘Hot money’ flows surged in January

The movement of so-called “hot money” of foreign investors in the local financial system was more active during the first month of the year especially in the stock market, according to the latest report of the Bangko Sentral ng Pilipinas.

BSP data released on Friday showed that registered foreign portfolio investments in January 2018 amounted to $1.62 billion, surpassing the $1.56 billion and $1.1 billion recorded the previous month and a year ago, respectively.

But the $1.5-billion outflow for the month similarly reflected an increase compared to those recorded in December ($1.1 billion) and January of 2017 ($846 million).

“On the overall, transactions for the month yielded net inflows of $162 million attributable to investor optimism over the passage of the first phase of the government’s tax reform program, positive news on corporate earnings and expected higher government spending for infrastructure projects,” BSP Governor Nestor Espenilla Jr. said in a statement.

On a net basis, the figure is lower than the net inflows recorded in January 2017 ($301 million) and December 2017 ($457 million).

About 69.2 percent of investments registered during the month were in Philippine Stock Exchange-listed securities pertaining mainly to holding firms, banks, property companies, food, beverage and tobacco firms, and utilities companies, while the remaining 30.8 percent went to peso-denominated government securities.

Transactions in PSE-listed securities and government securities yielded net inflows of $80 million and $82 million, respectively.

The United Kingdom, the US, Malaysia, Singapore and Hong Kong were the top five investor countries for the month, with a combined share to total at 80.2 percent. The US continued to be the main destination of outflows, receiving 79.9 percent of total remittances.

Registration of inward foreign investments with the BSP is optional under the liberalized rules on foreign exchange transactions.

The issuance of a BSP registration document entitles the investor or his representative to buy foreign exchange from authorized agent banks or their subsidiary and affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment.

Without this registration, the foreign investor can still repatriate capital and remit earnings on his investment, but the foreign exchange will have to be sourced outside the banking system.