$521M ‘hot money’ exits PH in June

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FOREIGN portfolio investment, also known as hot money, continued to leave the country for the fourth consecutive month in June as the central bank recorded a net outflow of $521 million during the month.

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The Bangko Sentral ng Pilipinas (BSP) said the June figure was lower than the $569 million net outflow recorded in May and reverses the $43.95 million net inflow recorded a year earlier.

Hot-money

Called hot money because of the ease with which they enter and leave the country, these funds are invested in Philippine financial assets and do not necessarily create jobs, unlike foreign direct investments (FDI) which are invested in assets like factories and equipment.
The BSP said total outflows in June rose to $2.21 billion from $1.62 billion a year earlier.

Meanwhile, cumulative figures for transactions during the first six months yielded a net inflow of $738 million, reversing the $1.3 billion net outflow seen in the comparable period last year.

Year-to-date inflows of $12.3 billion offset outflows of $11.56 billion, the BSP said.

Explaining the net outflow recorded in June, the BSP said: “This development may be attributed to the following: weaker-than-expected first quarter GDP [gross domestic product]growth of 5.2 percent for the Philippines vis-à-vis 6.6 percent last quarter and disappointing first quarter corporate earnings; profit taking; growing concerns on the looming interest rate hike in the United States; and the Greek debt crisis.”

Registered foreign portfolio investments rose by 1.4 percent to $1.69 billion from the previous year’s $1.67 billion “as the US Federal Reserve signaled slower than anticipated interest rate hikes which, based on market expectations, may possibly occur later this year,” it added.

It said about 79.2 percent of inbound investment flowed into listed stocks on the Philippine Stock Exchange such as holding firms; banks; food, beverage and tobacco companies; banks; property companies; and telecommunication firms. The rest of the hot money went into peso-denominated government securities (20.6 percent) and other peso debt instruments (0.2 percent).

The United States, the United Kingdom, Singapore, Luxembourg and Hong Kong were the top five investor countries for the month with a combined share of 80.5 percent, while the United States remained the main destination of outflows, receiving 77.1 percent of the total, it added.

The central bank expects portfolio investments this year to register a net inflow of $1.4 billion compared to the $310.21 million net outflow recorded in 2014.

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