Hot money swings back to net inflow

MANILA, Philippines — Foreign portfolio investments reverted to a net inflow in July after massive outflows in May and June due to the strong interest of investors in securities listed on the Philippine Stock Exchange (PSE), as well as peso-denominated debt instruments, according to the Bangko Sentral ng Pilipinas.

The inflow of net foreign portfolio investments amounted to $53.29 million in July as inflows reached $959.44 million, while outflows amounted to $906.15 million.

The BSP said last month’s net inflow was a complete reversal of the $516 million net outflow in June as investors anticipated a stronger earnings from listed companies for the second quarter.

“This may be attributed to investors’ anticipation of good second quarter corporate earnings results,” the central bank said.

However, the net inflow last month was 74.2 percent lower than the net inflow of $206.47 million in the same period last year.

Foreign portfolio investments are also called hot or speculative money because of its flighty nature.

The country’s major sources of speculative funds in July were the US, the United Kingdom, Hong Kong, Singapore and Luxemburg.

The bulk of the inflows went to Philippine Stock Exchange (PSE)-listed securities particularly banks, property companies, holding firms, food, beverage and tobacco firms, and small and medium enterprises, while the balance went to peso government securities (GS).

The BSP said net inflows for transactions in PSE-listed securities amounted to $51 million, while transactions for other

peso debt instruments amounted to $11 million in July. On the other hand, transactions in peso government securities yielded a net outflow of $9 million.

The central bank said the US continued to be the main destination of outflows, cornering 78.7 percent of the total withdrawals.

For the first seven months of the year, the BSP said the Philippines registered a net inflow of $455.74 million, a complete reversal of the $204.24 million net outflow recorded in the same period last year.

Inflows slipped 1.8 percent to $9.8 billion in January to July compared to $9.99 billion last year, while outflows declined by 8.3 percent to $9.35 billion from $10.19 billion.

The BSP expects a net outflow of foreign portfolio investments amounting to $900 million this year. The country booked a net outflow of $205.05 million last year, reversing the net inflow of $404.43 million in 2016 as more capital were repatriated from the country due to the series of rate hikes by the US Federal Reserve.