Hot money reverses to $2-B inflow in 8 months

MANILA, Philippines - Foreign portfolio investments or “hot money” turned around to a $2-billion net inflow in the first eight months of the year amid the country’s strong macroeconomic fundamentals, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

This was a complete reversal of the $211.8-million net outflow in the same period last year.

The central bank traced the inflows to the P37-billion infusion made by Japan’s largest financial institution, the Bank of Tokyo Mitsubishi UFJ Ltd (BTMU), in exchange for a 20 percent stake in Security Bank Corp., as well as the P25.13 billion initial public offering of cement maker Cemex Holdings Philippines Inc.

The BSP also cited large net inflows in shares of two holding companies as well as the renewed interest in peso government securities.

Data showed inflows fell 15.77 percent to $12.6 billion from January to August this year against the $14.96 billion booked in the same period last year while outflows dropped 29.9 percent to $10.63 billion from $15.17 billion.

Hot money are referred to as speculative funds controlled by investors who actively seek short-term returns and high interest rate investment opportunities.

For the month of August alone, the country booked a net inflow of $427.07 million, reversing the net outflow of $542.5 million in the same month last year.

The Chinese believe August is a ghost month and is generally considered unlucky for business deals.

However, data showed inflows of foreign portfolio investments surged 57.6 percent to $1.75 billion in August from $1.11 billion last year.

About 83 percent of investments registered in August were injected into companies listed at the Philippine Stock Exchange (PSE), particularly in holding companies; property firms; banks, food, beverage, and tobacco firms; and telecommunication companies.

On the other hand, 17 percent of the inflows went to peso government securities.

Data showed transactions in PSE-listed securities booked a net inflow of $248 million while peso government securities yielded a net inflow of $186 million. Investments in other peso debt instruments resulted in a $7 million net outflow.

Major source of portfolio investments include the United Kingdom, US, Singapore, Luxemburg, and Belgium while the US emerged as the major destination of outflows.

The Philippines registered a faster gross domestic product (GDP) growth of 6.9 percent in the first half of the year from 5.5 percent in the same period last year.

This after it booked a stronger than expected GDP expansion of seven percent in the second quarter from 6.8 percent in the first quarter amid boost from election-related spending.

The BSP said it expects foreign portfolio investments yielding a net outflow of $1.1 billion this year. The amount of hot money pulled out from the Philippines almost doubled to $599.69 million last year from $310.21 million in 2014 due to uncertainties brought about by normalization of interest rates in the US and the economic slowdown in China.