Hot money Aug net inflow at record $427M

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HOT money or foreign portfolio investments in the Philippines rose to a record high in August, registering a net inflow of $427 million, amid positive expectations that the Duterte administration will increase infrastructure spending.

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Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands, said: “The August numbers do seem to be the highest on record since the data started in 2005.”

Mapa said the surge was mostly due to the P25-billion initial public offering of Cemex Holdings Philippines Inc. in July which “attracted scores of investors given their solid prospects, with Duterte seen to bolster infrastructure spending and the housing market remaining upbeat.”

“The inclusion of Security Bank Corp. in the MSCI index also helped see flows channeled to that stock,” he said in an email interview on Thursday.

Data from the Bangko Sentral ng Pilipinas (BSP) released on Thursday showed that registered foreign portfolio investments amounted to $1.8 billion in August, a 57.4 percent increase compared to the $1.1 billion recorded a year ago, while outflows for the month amounted to $1.3 billion.

The BSP said the net inflow of $427 million in August was 60 percent lower than the previous month but was a “significant improvement” from a net outflow of $543 million in the same month a year ago.

It noted that the while the hot money inflow in August was 22.6 percent lower than in July, the figure was 57.4 percent higher than the $1.1 billion inflow recorded in the same month in 2015.

While the hot money outflow in August was 10.6 percent higher than in July, the BSP also noted that it was 19.8 percent lower than the outflows a year ago.

Foreign portfolio investments are dubbed “hot money” due to the ease by which the funds enter and leave the country. They are invested in financial assets but do not necessarily create jobs, unlike foreign direct investments that are poured into assets such as factories and equipment.

The BSP said January to August transactions resulted in inflows of $2 billion.

It said about 82.8 percent of the inflows in August went to Philippine Stock Exchange-listed firms while the remainder went to peso government securities.

The United Kingdom, the United States, Singapore, Luxembourg, and Belgium were the top five investor-countries for the month with a combined share of 78.5 percent, with the US being the main destination of outflows, accounting for 84.2 percent of the total remittances.

“Going forward, we may see these numbers dip given external developments with the Fed set to hike rates sooner rather than later,” BPI’s Mapa said.

“The PSEi [Philippine Stock Exchange index] has been hit hard by a confluence of factors both domestically and internationally and this will be reflected in outflows with foreign players heading for the exits,” he added.

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