Hot money inflows plunge 91% in July

MANILA, Philippines — Foreign portfolio investments posted only a slim net inflow in July, plunging by 91 percent from a year earlier as foreign withdrawals nearly matched the amount of funds entering the country.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed foreign portfolio investments registered through authorized agent banks yielded a net inflow of $66.47 million in July, sharply lower than the $742.56 million recorded in the same month last year.

The July figure was also 60.9 percent lower than the $170.12-million net inflow posted in June.

This so-called hot money are placements by overseas investors mainly in government securities and shares listed on the Philippine Stock Exchange (PSE). They are commonly referred to as “hot money” because they can move quickly in and out of financial markets as investor sentiment changes.

A net inflow means more registered foreign funds entered than left the country during the period.

Based on BSP data, gross inflows declined by 4.1 percent to $2.37 billion in July from $2.47 billion a year ago. Compared to June, inflows fell by 19.5 percent from $2.94 billion.

Meanwhile, gross outflows jumped by 33.2 percent year-on-year to $2.3 billion from $1.73 billion. Outflows, however, were 17 percent lower than the $2.77 billion recorded in June.

PSE-listed securities registered a net inflow of $86 million during the month. Government securities, on the other hand, recorded a modest net outflow of $20 million.

July marked the third straight month of net inflows. But despite the recent improvement, foreign portfolio investments remained deeply in negative territory on a cumulative basis due to heavy withdrawals earlier in the year.

From January to July, registered foreign investments posted a net outflow of $3.94 billion, reversing the $2.29-billion net inflow recorded in the same period last year.

Gross inflows during the seven-month period rose by 8.1 percent to $15.61 billion from $14.44 billion a year ago. However, gross outflows surged by 60.8 percent to $19.55 billion from $12.15 billion, more than offsetting the increase in money coming into the country.

The year-to-date outflow was concentrated in government securities and PSE-listed shares.

Government securities recorded a net outflow of $2.21 billion from January to July as foreign investors placed $10.08 billion in these instruments but withdrew $12.3 billion.

PSE-listed securities, meanwhile, posted a net outflow of $1.73 billion, with gross inflows of $5.52 billion falling short of the $7.25 billion that left the market.

Registration of inward foreign investments with the BSP or authorized agent banks is optional, but is required if investors intend to purchase foreign currency from the banking system to repatriate capital or remit investment earnings.