Hot money back to net inflow in Jan

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FOREIGN portfolio investment flowed back into the Philippines in January this year to net $301.33 million, the central bank said on Thursday, attributing the reversal of outflows to renewed optimism after the local economy regained its brisk pace in the latter part of 2016.

A private economist cautioned, however, that the expected US interest rate hikes this year could still trigger an exit of “hot money” from the Philippine market, although he acknowledged that the domestic growth momentum could mitigate the extent of the outflows.

The net inflow in January 2017 reversed a net outflow of $129.85 million recorded in January 2016, as well as the $314.65-million net outflow in December last year, official data showed.

The Bangko Sentral ng Pilipinas (BSP) said the total $1.147 billion inflows in January exceeded total outflows of $845.83 million during the month.


The $1.147 billion of registered investments in January were up 39.8 percent from $820.40 million a year earlier. Measured from December, the increase in inflows was 8.7 percent from $1.05 billion.

Outflows in January, meanwhile, eased 11 percent from $950.25 million a year earlier, and 38.3 percent from $1.36 billion in December 2016.

“This may be attributed to optimism about the New Year and positive investor reaction to the announced 6.6 percent GDP [gross domestic product]growth of the country in the fourth quarter of 2016,” the BSP said in a statement released along with the figures.

About 95.4 percent of investments registered during the month flowed into Philippine Stock Exchange-listed securities, mainly of banks, holding firms, property companies, food, beverage and tobacco firms, and utilities companies.

The rest of the hot money went into peso government securities and other peso debt instruments.

More than 79 percent of the portfolio investments came from the United Kingdom, the United States, Singapore, Luxembourg and Hong Kong. The main destination of the outflows from the Philippines, on the other hand, was the US, accounting for 89.3 percent of the total fund transfers.

Foreign portfolio investments are also known as hot money because of the ease with which the funds move in and out of a country and do not necessarily create jobs, unlike foreign direct investments, which are used to build factories and buy capital equipment.

Fed could trigger outflows

Market economist Guian Angelo Dumalagan of the Land Bank of the Philippines said there might be more outflows from the Philippines than inflows of foreign portfolio investments this year due to expectations of as many as three US interest rate hikes.

“Higher US interest rates and bets for faster US growth might prompt foreign investors to move their funds back into the US economy,” he warned.

He said the level of uncertainty is high, as this view hinges primarily on expectations that US President Donald Trump would pursue all of his promised fiscal initiatives.

However, he added, any deviation from this view could turn the tables around, especially since lower-than-expected US fiscal boost could also trim the number of US rate hikes this year.

“Despite likely higher hot money outflows (from the Philippines), inflows might be trailing close behind on account of the (country’s) solid economic prospects in 2017,” he said.

Domestic economic activity, which is likely to be firm, could invite foreign investors to participate in and profit from the country’s solid growth momentum, Dumalagan added.

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