Hot money reverses to net outflow in Aug

MANILA, Philippines - The stream of foreign portfolio investments reversed its course last month as it registered a net outflow, the central bank said.

Net hot money outflow amounted to $441.85 million in August as compared to a net inflow to $387.39 million a year ago.

This as gross inflows slid 20 percent to $999.28 million from last year’s $1.256 billion, while gross outflows went up 66 percent to $1.441 billion from $868.31 million.

The August level is also a reversal of the net hot money inflow of $895.27 million in July.

The Bangko Sentral ng Pilipinas said hot money declined in August from the previous month due to “shortened trading weeks brought about by holidays and heavy flooding, hesitancy to invest during the ghost month of August, and the possible scaling down of the US Federal Reserve’s quantitative easing program.”

The country was battered by Typhoon Labuyo, Tropical Storm Maring and monsoons in August that prompted the suspension of trading at the local bourse. At the same time, based on Chinese beliefs, the month is typically unlucky for business – thus the name ghost month.

Meanwhile, the US Fed’s anticipated move has caused volatilities not only in the country but in the region as well, particularly for emerging markets.

“Investments in August were mainly in PSE (Philippine Stock Exchange)-listed securities and peso GS (government securities),” the central bank said.

For investments in the stock market, funds went to holding firms ($381 million), property companies ($127 million), banks ($121 million), food, beverage and tobacco firms ($68 million), and telecommunication companies ($4 million).

The top five investor countries were the United Kingdom, the United States, Singapore, Luxembourg and Hong Kong. The United States, meanwhile, remained the main beneficiary of outflows.

In the eight months to August, net hot money inflow amounted to $2.007 billion, 11 percent below the $2.247 billion seen in the same period last year.

Gross inflows surged 64 percent to $19.141 billion from $11.685 billion, while gross outflows jumped 82 percent to $17.134 billion from $9.438 billion.

The central bank expects net hot money inflow to hit $4.4 billion this year.