• Hot money inflow hits 17-month high

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    July net inflow $1.06B

    MONEY coming in and going out of the Philippines as portfolio investments posted a net inflow of $1.06 billion in July, the highest in 17 months, the latest data showed.

    It was the highest since February 2015, when the net inflow hit $1.19 billion.

    Data from the Bangko Sentral ng Pilipinas (BSP) on Friday showed that total inflow in July strengthened to $2.26 billion from $1.43 billion the previous year and from $1.8 billion in June 2016, while total outflows ebbed to $1.2 billion from $1.59 billion in July 2015, as well as from $1.35 billion in June this year.

    The July surge was aided by the initial public offering (IPO) of an industrial firm and government securities (GS).

    The July net inflow—a turnaround from the $160.1 million net outflow recorded a year earlier—was 136 percent higher than the $450.87 million net inflow registered in June.

    7-month inflow rises

    Cumulative figures for transactions during the first seven months of the year yielded a net inflow of $1.64 billion, higher than the $478.29 million net inflow seen in the same period last year.

    Seven-month inflows of $10.71 billion offset outflows of $9.06 billion, the BSP said.

    The BSP pointed out that the overall net inflows occurred despite “profit-taking, concerns about the slowdown of the Chinese economy, and the decline in global oil prices.”

    Components

    Most of the registered inflows, or 81.7 percent, went to the Philippine Stock Exchange-listed firms. The funds were used to purchase shares in construction, infrastructure and allied services; property companies; holding firms; banks; and food/beverage/tobacco firms.

    At the same time, 18.3 percent went to peso government securities (GS).

    Transactions in all instruments yielded net inflows: PSE-listed securities ($821 million), and peso GS ($246 million).

    The United Kingdom, the United States, Singapore, Hong Kong, and Luxembourg were the top five sources of the inflow, accounting for 79.5 percent.

    The US was the main destination of outflows, accounting for 79.3 percent of the total remittances.

    Foreign portfolio investments in Philippine financial assets are considered hot money because of the ease by which the funds move in and out of the country and they do not necessarily create jobs, unlike foreign direct investments that are put into assets such as factories and equipment.

    Hot money yielded a net outflow of $599.70 million last year, exceeding the central bank’s forecast of $200 million.

    A larger net outflow of $1.3 billion is expected for 2016 given uncertainties surrounding China, other emerging markets, as well as the next moves of the US Federal Reserve.

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