Portfolio inflows (or hot money) reflect the economic condition of the Philippines and serve as a barometer of confidence expressed by foreign investors who decide on whether or not to park their funds in the country. These consists mostly of speculative funds which are parked in markets where investors expect to maximize their yields or gains.
Data from the Bangko Sentral ng Pilipinas (BSP) showed portfolio inflows from January to July totaled $854.4 million compared to outflows of $832.5 million.
In contrast, inflows during the same period last year was $1.886 billion compared to outflows of $2.268 billion.
In July, there was an outflow of $68.9 million when the peso was at its weakest in months against the US dollar, outpacing inflows of $54.5 million, resulting in a net outflow of $14.4 million.
Market analysts said the net outflow in July, which resulted in a total net inflow of $21.9 million for the first seven months, could be partly attributed to the generally nervous sentiment of investors toward emerging markets.
As a result, the peso was badly battered along with the currencies of other emerging markets such as Argentina and Turkey, two of the biggest emerging markets which almost defaulted on their loans with multilateral creditors.
The data also indicates that portfolio funds still entered the country even in January or at the height of the political crisis which eventually led to change in government leadership.
During that period, inflows totaled $213.8 million while outflows reached $182.4 million or a total net inflow of $31.4 million.
Confidence in the new administration was restored somehow in February, but this was still not enough to calm nervous investors as outflows outpaces inflows during that period.
In February, total inflows was $120.9 million but outflows was bigger at $134.6 million or a net outflow of $13.7 million.
The following month, the skepticism continued with inflows of $130 million clearly outpaced by outflows of $149.4 million.
Jitters went on in April, inflows came to only $102.4 million while outflows totaled $121.6 million.
In May, investors were somehow assured by the decisive action taken by the government to stem supporters of deposed President Joseph Estrada who staged violent protests.
Inflows outpaced outflows for the first time with inflows of $88.8 million compared to outflows of $81.5 million or a net inflow of $7.3 million. – Rocel Felix