• Hot money flows post Sept rebound


    But year-to-date position remains negative

    Foreign portfolio investments recovered in September but year-to-date “hot money” flows remained negative, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.

    Last month saw a net inflow of $112.63 million following August’s net outflow of $57.52 million. A year earlier, portfolio investments posted a net inflow of $807.15 million.

    “This may be attributed to investor reaction to the extension of the debt limit deadline in the United States and the Philippine Senate’s approval of the first package of the government’s tax reform program,” the BSP said.

    A deal with Democratic leaders allowed US President Donald Trump to secure a three-month debt limit extension from Congress, while the proposed Tax Reform for Acceleration and Inclusion bill reached the plenary level at the Philippine Senate.

    Land Bank of the Philippines market economist Guian Angelo Dumalagan concurred, saying “These developments attracted foreign funds into the country, despite geopolitical concerns in North Korea and hawkish moves and remarks from the US Federal Reserve.”

    Outflow for Jan.-Sept.

    Reckoned from the start of the year, however, hot money posted outflows of $206.25 million, a reversal from the $1.26-billion net inflow recorded year earlier.

    The central bank traced this to “certain domestic and International developments (including the interest rate hikes by the US Federal Reserve, global terrorist attacks, North Korea’s nuclear missile testing and the closure order for several mining companies in the country) earlier in the year.”

    IHS Markit chief economist Rajiv Biswas,said the nine-month result reflected a number of factors, including concerns among global investors about political risks related to the insurgency in Mindanao and the protracted battle for Marawi City.

    “The deteriorating external account position with a current account deficit expected for 2017 and the gradual depreciation of the peso against the USD during 2017 have also been factors impacting on investor sentiment,” he said.

    September tally

    Hot money inflows totaled $1.29 billion in September, 38.5 percent and 1.8 percent higher compared to the $936 million and $1.27 billion recorded in August 2017 and September last year, respectively.

    Outflows reached $1.18 billion, up 19.1 percent month on month but 43.1 percent lower from last year.

    The bulk or 80.9 percent of September’s hot money was invested in Philippine Stock Exchange (PSE)-listed securities, mainly in holding firms; property companies; banks; casinos and gaming firms; and tobacco companies.

    Peso government securities (GS) accounted 18.7 percent of the total, while the 0.4 percent balance went to peso time deposits (PTDs).

    “Transactions in PSE-listed securities resulted in net outflows of $42 million, while investments in Peso GS and PTDs yielded net inflows of $150 million and $5 million, respectively,” the Bangko Sentral said.

    The United Kingdom, United States, Singapore, Norway and Luxembourg, were the top five investor countries with a combined 79.4 percent of the total. The US accounted most of the repatriated funds with a 79.1 percent share.

    Foreign portfolio investments are called “hot money” because of the ease by which these can be invested and taken out of the country. The investment does not necessarily create jobs, unlike foreign direct investments that are used to build factories and buy capital equipment.


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