Hot money inflow in May reverses April outflow

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Net foreign portfolio investments in the Philippines rebounded in May on foreign buying in the stock market, renewed interest in government securities (GS), and positive sentiment on peaceful elections.

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Data from the Bangko Sentral ng Pilipinas (BSP) on Thursday showed that hot money registered a $72.81 million net inflow in May.

The May inflow reversed the $354.05 million net outflow registered in April, as well as the $569.27 million net outflow recorded a year earlier.

Total inflows thickened to $1.78 billion from $1.27 billion the previous month and from $1.58 billion in May 2015.

Total outflows, meanwhile, rose to $1.71 billion from April’s $1.62 billion but dropped from the $2.15 billion posted a year earlier.

The central bank said the net inflows in May were mainly due to “large inflows in shares of a holding company and a universal bank; renewed interest in peso GS; and the relatively peaceful conduct of elections.”

However, the central bank refused to disclose the identity of the holding company and a universal bank that received large inflows in shares.

On May 9, the country held its local and national elections in which Mayor Rodrigo Duterte of Davao City emerged as the winner in the presidential race.

5-mth inflow down
Cumulative figures for transactions during the first five months yielded a net inflow of $129.08 million, lower than the $1.2 billion net inflow seen in the comparable period last year.

Five-month inflows of $6.6 billion offset outflows of $6.5 billion, the BSP said.

The BSP explained this is amid “profit-taking, concerns about the slowdown of the Chinese economy, and the decline in global oil prices.”

Components

Most of the registered inflows, or 83.8 percent, went to Philippine Stock Exchange-listed firms. The funds were used to purchase shares in holding firms, property developers, banks, food/beverage/tobacco firms, and telecommunications companies.
Another 16.2 percent went to peso government securities (GS).

PSE-listed securities and peso GS yielded net inflows of $46 million and $27 million, respectively.

The United Kingdom, the United States, Singapore, Luxembourg, and Switzerland were the top five investor-countries for the month, with a combined share of 84.8 percent.

The US was the main destination of outflows, accounting for 80.9 percent of the total remittances.

Also called hot money because of the ease by which the funds enter and leave the country, foreign portfolio investments are invested in Philippine financial assets and 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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