MANILA, Philippines - Foreign portfolio investments slumped for the second straight month in June, but the lower net outflow suggested investors are beginning to return to the local financial markets, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
Portfolio placements – also called “hot money†for the ease they enter and exit economies – registered a net outflow of $22.98 million last month, sharply lower than the record high net outflow of $640.84 million in May. The June figure, however, was higher than the year ago net outflow of $7.69 million.
The net outflow, which indicated more investments left the country than entered, continued from May when investors had a “knee-jerk reaction†to the pronouncement the US Federal Reserve would reduce its bond purchases program.
As a result, investors re-positioned their holdings from developing countries back to the US on optimism the recovery would bring higher returns there.
“The expected return of funds to emerging markets has already started in June,†the central bank said in a statement.
Broken down, gross inflows reached $2.841 billion, while gross outflows totaled $2.864 billion, central bank data showed.
According to the BSP, the bulk of portfolio placements were channeled to the Philippine Stock Exchange (PSE), where listed companies attracted $2 billion in inflows. This accounted for 71 percent of the total.
The main beneficiaries in the PSE were holding firms ($889 million), banks ($270 million), property firms ($219 million), food, beverage and tobacco companies ($207 million) and telecommunication companies ($140 million).
The rest of hot money inflows, the central bank said, found their way to peso government securities and peso time deposits totaling $787 million and $40 million, respectively.
Top sources of foreign inflows were the US, the United Kingdom, Luxembourg, Singapore and Hong Kong. The US continued to benefit the most from the outflows.
For the first half of the year, portfolio placements remained on the positive territory, recording a net inflow of $1.554 billion, up by nearly three-fourths from last year’s $896.46 million.
The central bank projects hot money net inflow to hit $4.4 billion this year.
Portfolio investments form part of the country’s balance of payments, which gauges the economy’s capacity to meet its external debt and trade obligations.