Hot money flows out for the first time in 9 months

MANILA, Philippines - Foreign portfolio investments slumped for the first time in nine months last March despite the Philippines bagging its first-ever investment grade status that same period, the central bank reported on Thursday.

Portfolio placements— also called “hot money” for the ease they enter and exit economies— posted a net outflow of $395.14 million. This was the first net outflow since June last year’s $7.69 million.

A net outflow indicates more investments, usually placed in bond and stock markets, left the country than entered. Gross inflows reached $2.334 billion, while gross outflows totaled $2.729 billion.

It came even as debt watcher Fitch Ratings granted the Philippines its historic investment grade rating after an upgrade to BBB- from BB+.

An investment grade seal is expected to attract more foreign investments to the country, among others. The Aquino administration has made it its vow to reach such rating this year. 

The central bank, in a statement, said outflows were a result of profit taking due to “continuing concerns” about the eurozone crisis that offset local good local news, such as the Fitch credit rating movement, that month. 

For the first quarter though, hot money remained on the positive territory, growing by 134 percent to $1.086 billion net inflow from previous year’s $464.45 million. 

The BSP has forecast $3 billion net inflow this year, although that number is up for review this month. Last year, portfolio placements recorded a net inflow of $3.911 billion. 

Broken down, data showed majority of portfolio inflows chose the stock market than the bond market. The former attracted $2 billion in inflows against the latter’s $351 million. The balance of $18 million went to peso time deposits. 

Top sources of investments were the United States, Hong Kong, Singapore and Luxembourg, which collectively accounted for 88.5 percent of total inflows. The US continued to be the main destination for outflows.

Hot money forms part of the country’s balance of payments (BOP), which measure our capacity to meet external trade obligations and foreign debts. 

BOP has been in a surplus since 2009, indicating more than enough resources for the Philippines to meet its liabilities.