Hot money outflow doubles in 2015 – BSP

MANILA, Philippines - Foreign portfolio investments or ‘hot money’ pulled out from the Philippines almost doubled last year due to uncertainties brought about by the normalization of interest rates in the US and the economic slowdown in China.

In a report yesterday, the Bangko Sentral ng Pilipinas (BSP) said the Philippines booked a net outflow of foreign portfolio investments amounting to $599.69 million last year or 93.3 percent higher compared to the $310.21 million outflow in 2014.

Last year’s outflow was almost three times the projected outflow of $200 million set by Philippine monetary authorities.

Foreign portfolio investments are also known as ‘hot money’ since these are speculative capital flows particularly in shares traded at the Philippine Stock Exchange (PSE) that move very quickly in and out of markets.

The BSP said the Philippines booked a net inflow of foreign portfolio investments in January, February, and October but posted net outflow the rest of the year.

“While net cumulative inflows reached $1.8 billion during the first two months of 2015, these inflows were fully offset by net outflows in the succeeding months except for the small net inflow of $28 million in October,” the central bank said.

The BSP traced the net outflow to profit taking in the local stock market as well as concerns on the then imminent interest rate liftoff in the US and the slowdown of the Chinese economy.

Inflows slipped 8.5 percent to $19.92 billion last year from $21.79 billion in 2014 while outflows also declined 7.2 percent to $20.52 billion from $22.11 billion.

“The highest inflows were recorded during the first quarter of the year which may be attributed to investor optimism arising from 2014 positive corporate earnings and upgraded outlook for the country by the International Monetary Fund, coupled with higher investments in PSE-listed shares,” the BSP added.

The data showed the top five investor countries included the United Kingdom, US, Singapore, Luxemburg, and Hong Kong. These countries accounted for 79.6 percent of total inflows.

Bulk or 77.5 percent of the total inflows were invested in PSE-listed securities while 21.7 percent went to peso government securities.

Transactions resulted in net inflows of $52 million for peso time deposits, $25 million in peso government securities, and $13 million in unit investment trust funds.

serve raised its near-zero interest rates 25 basis points for the first time in almost a decade last December.