‘Hot money’ outflow outpaces inflow

For the second time in September, the Bangko Sentral ng Pilipinas (BSP) reported that foreign portfolio investments outflow exceed inflow by $5 million for the week ending Sept. 23.

 In the week ending Sept. 9, BSP-registered foreign portfolio investments or so-called "hot money" also posted a net outflow of $29.8 million.

 For the period Sept. 17 to 23, net inflows reached $77.5 million as against $82.5 million, resulting in an outflow of $5 million.

But for the period Sept. 2 to 23, gross net inflow stood at $1.98 billion, with $4.63 billion in total inflows against outflows of $2.64 billion.

 The gross inflows for the said period was far better than the $191.7-million net inflow reported in the same period in 2004.

 The BSP did not give any reason for the net outflow but the renewed political and inflation concerns were the main factors cited by the monetary authority when it reported the same situation two weeks ago.

Foreign portfolio investments refer to placement made by non-residents in domestic financial instruments directly registered with the BSP or with custodian banks.

 Such financial instruments include shares of stock acquired through the Philippine Stock Exchange (PSE) trading floor, peso-denominated government securities, peso time deposits in banks, and money market instruments issued by the local private sector.

 The non-resident investments are funded with new inward remittances of foreign exchange converted into pesos through banks operating in the Philippines.

 In contrast, BSP-registered direct equity investments refer to non-resident investments in firms/industries registered with BSP to allow such investors to source foreign exchange from the banking system for repatriation of dividends, profits and earnings from such investments.

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