‘Hot money’ down last March

MANILA, Philippines - Foreign portfolio investments slumped for the first time in nine months last month despite the Philippines’ first-ever investment grade status in the same period, the central bank reported yesterday.

Portfolio placements, also called “hot money” for the ease in which they enter and exit economies, posted a net outflow of $395.14 million. It was the first net outflow since June last year’s $7.69 million.

A net outflow indicates more investments – usually in bond and stock markets – left the country. Gross inflows reached $2.334 billion while gross outflows totaled $2.729 billion.

Debt watcher Fitch Ratings granted the Philippines a historic investment grade rating after an upgrade to BBB- from BB+.

An investment grade seal is expected to attract more foreign investments to the country, among others.

The Aquino administration has vowed to reach such rating this year.

The central bank, in a statement, said outflows were a result of profit taking due to “continuing concerns” about the eurozone crisis that offset local good news, such as the Fitch credit rating movement that month.

For the first quarter, hot money remained on the positive territory, growing by 134 percent to $1.086 billion net inflow from the previous year’s $464.45 million.

The Bangko Sentral ng Pilipinas has forecast $3-billion net inflow this year, but the number is still up for review.

Last year, portfolio placements recorded a net inflow of $3.911 billion.

Data showed a majority of portfolio inflows chose the stock market rather than the bond market. The former attracted $2 billion in inflows against the latter’s $351 million. The balance of $18 million went to peso time deposits.

Top sources of investments were the United States, Hong Kong, Singapore and Luxembourg, which collectively accounted for 88.5 percent of total inflows. The US continued to be the main destination for outflows.

Hot money forms part of the country’s balance of payments (BOP), which measure our capacity to meet external trade obligations and foreign debts.

BOP has been in a surplus since 2009, indicating more than enough resources for the Philippines to meet its liabilities.