July net outflow $160M vs June $521M
FOREIGN portfolio investment, also known as hot money, continued to exit the Philippines for the fifth consecutive month in July, but the net outflow has eased to $160 million from more than half a billion dollars that left the country in June. (See related graph).
Compared with the year earlier, however, the July net outflow is a reversal of the $321 million net inflow recorded in the year-ago period.
The Bangko Sentral ng Pilipinas (BSP) did not give an explanation for the slowdown in the outflow in July.
Since March this year, hot money has been posting net outflows, with the biggest recorded in May at $569 million. Before March the trend has shown a net inflow of foreign portfolio investment since November 2014 with $369 million. It continued growing to a peak of $1.19 billion in February this year.
Called hot money because of the ease with which they enter and leave the country, the funds are invested in Philippine financial assets and do not necessarily create jobs, unlike foreign direct investments (FDI), which are invested in assets such as factories and equipment.
The BSP said total outflows in July rose to $1.6 billion from $1.4 billion a year earlier, while total inflows dropped to $1.4 billion from $1.7 billion in July 2014.
“The imminent interest rate hike in the US weighed down on investor sentiment,” the BSP said, explaining the net outflow recorded in July.
Seven-month positive flow
Cumulative figures for transactions during the first seven months yielded a net inflow of $478 million, reversing a $1.1 billion net outflow seen in the comparable period last year.
Year-to-date inflows of $13.5 billion offset outflows of $13 billion, the BSP said.
The central bank said about 75.4 percent of inbound investment flowed into listed stocks on the Philippine Stock Exchange such as holding firms; banks; property companies; food, beverage and tobacco companies; and telecommunication firms. The rest of the hot money went into peso-denominated government securities (24 percent) and peso time deposits and other peso debt instruments (0.6 percent).
The United Kingdom, the United States, Singapore, Hong Kong and Luxembourg were the top five investor countries for the month, with a combined share of 80.2 percent, while the US remained the main destination of outflows, receiving 71.9 percent of the total, it added.
The central bank expects portfolio investments this year to register a net inflow of $1.4 billion compared to the $310.21 million net outflow recorded in 2014.