Hot money flows out of RP in January

Close to $120 million worth of foreign portfolio investments left the country in the first month of the year, reversing the $543-million net inflow recorded in January 2005 as foreign investors went into a profit-taking mode.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that transactions in BSP-registered foreign portfolio investments showed a net outflow of $118.5 million, as new registered investments lagged behind massive capital repatriations or outflows.

The January capital outflow was in stark contrast to last year’s performance when the BSP recorded total net inflows of over half a billion dollars.

The BSP said investor sentiment has been generally upbeat coming into 2006 but foreign portfolio investors took the opportunity to cash in on profits in the beginning of the year.

The BSP said portfolio investments in peso-denominated government securities posted a net outflow of $139.2 million in January due to profit-taking as the peso continued to appreciate against the US dollar.

"In addition, there were no new issues of Treasury notes, the instrument preferred by foreign portfolio investors, due to the liquid cash position of the Bureau of the Treasury," the BSP said.

In the stock market, the BSP reported that investor sentiment was generally upbeat as reflected in a net inflow of $73.8 million. The funds went into stocks listed at the Philippine Stock Exchange (PSE).

Registered foreign portfolio investments amounted to a total of $228.9 million, consisting of PSE-listed securities ($184.3 million or 80.5 percent of the total) and placements in peso-denominated Fixed Rate Treasury Notes (FXTNs) amounting to $44.6 million.

These investments were funded with new inward remittances of foreign exchange converted into pesos through banks operating in the Philippines.

By country of origin, the bulk or 78 percent of the new registered investments came from the United States, United Kingdom and Singapore.

Meanwhile, capital repatriations/outflows pertaining to BSP-registered investments amounted to $347.4 million. Divestments in government securities comprised $183.8 million or 53 percent of total.

On the other hand, about $110.5 million or 32 percent reflected the sale of PSE-listed shares by foreign investors and withdrawals of peso deposits accounted for 15 percent of total outflows, amounting to $53.1 million.

"Peso deposits withdrawn for outward remittance mainly represented proceeds of earlier divestments from PSE-listed shares and government securities", the BSP said.

On a gross basis, the portfolio investments registered in Jan. 2006 were only a third of the $680.5 million figure in January 2005 while outflows/capital repatriations pertaining to registered foreign portfolio investments were 2.5 times last year’s $137.0-million total.