Hot money June net inflow $44M

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The movement of portfolio investments in and out of the Philippines resulted in a net inflow in June, reversing a net outflow seen a year earlier but narrowing from the investment level recorded in May, central bank data shows.

Transactions in June showed a net inflow of $44 million, a reversal of the $85 million net outflow a year earlier, according to data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday.

However, on monthly basis, the level of hot money transactions in June was significantly lower than the $545 million of net inflow in May.

Justino Calaycay, analyst at the Accord Capital Equities Corp. believes that the easing of foreign portfolio investments net inflows in June is a result of the investors’ expectation of higher interest rates in the country amid the growing United States economy.


“In part there were expectations then that the BSP may tweak rates in addition to the improvements in the US economy,” Calaycay said in a text message to The Manila Times.

“There were likewise valuation concerns and some activity took place ahead of closing their [investors’] first semester positions,” he added.

The volume of hot money flows was much lower year-on-year in June as well. Outflows reached $1.62 billion compared to $2.86 billion a year earlier, while June inflows were recorded at $1.67 billion from the previous year’s $2.78 billion.

About 75.3 percent of the investments went to Philippine Stock Exchange (PSE)-listed securities such as holding firms, banks, property companies, food, beverage and tobacco firms; and telecommunication companies; and 24.7 percent went to peso-denominated government securities, according to BSP data.

“The United Kingdom, the United States, Singapore, Malaysia, and Luxembourg were the top five investor countries for the month, with a combined share to total investment inflows of 81.4 percent. The United States continued to be the main destination of outflows, receiving 81 percent of the total outflows,” the BSP said.

Last year, foreign portfolio investments ended at a net inflow of $4.2 billion and surpassed the revised $3.2-billion target of the BSP for the year. For 2014, these registered investments are seen to decline to $1.5 billion as inflows are projected at $1.8 billion against $300 million in outflows.

Foreign portfolio investments are one of the components of the country’s balance of payments (BOP), which summarizes the country’s economic transactions with the rest of the world over a certain period. The central bank has forecast a narrower BOP surplus this year at $1.1 billion.

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