Hot money reverts to net outflow in November

MANILA, Philippines - More foreign portfolio investments or “hot money” were pulled out of the Philippines last month due to uncertainties brought about by the impending interest rate hike in the US this month as well as weak corporate earnings.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday a net outflow of $68.79 million in November, a reversal of the $27.84 million net inflow in October.

Last month’s net outflow was also a complete reversal of the net inflow of $369.92 million in November last year.

Foreign portfolio investments are also known as “hot money” since these are speculative capital flows that move very quickly in and out of markets.

Inflows fell 39.4 percent to $1.08 billion in November from $1.79 billion in the same month last year, while outflows also declined 19 percent to $1.15 billion from $1.42 billion.

“Investors reacted to weak third quarter corporate earnings reports, renewed concerns on the prospect of an interest rate hike in the US by December, and the thin volume of transactions brought about by trading holidays,” the BSP said.

Trading at the Philippine Stock Exchange (PSE) and the Philippine Dealing and Exchange Corp. (PDEx) were suspended after Malacañang declared Nov. 18 and 19 as holidays as the country hosted the Asia-Pacific Economic Cooperation (APEC) Leaders’ Summit.

The BSP said 78.1 percent of investments registered in November were in investments in PSE-listed securities primarily in holding firms, banks, property companies, food, beverage and tobacco firms, and utility companies.

However, investments in PSE-listed securities resulted in net outflows of $89 million last November.

On the other hand, the central bank said 21.5 percent went to peso-denominated government securities, while the rest of the investments were in other peso debt instruments.

Data revealed transactions in peso-denominated government securities yielded a net inflow of $16 million while that of other peso debt instruments had $4 million.

The BSP added the United Kingdom, US, Singapore, Luxemburg and Belgium were the top five investor countries with combined share to total of 82.8 percent.

Likewise, the US continued to be the main destination of outflows, receiving 80.6 percent of total.

For the first 11 months, the BSP said foreign portfolio investments yielded a net outflow of $429.18 million, 39.3 percent lower compared to the net outflow of $707.22 million in the same period last year.

Inflows decreased 6.1 percent to $18.69 billion from January to November versus $19.9 billion in the same period last year, while outflows declined 7.2 percent to $19.12 billion from $20.61 billion.

The BSP sees foreign portfolio investments hitting a net inflow of $1.4 billion this year from a net outflow of $310.21 million last year.