Hot money net outflow triples to $542M in Aug

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Surges from $160M net outflow in July; reverses yr-ago net inflow of $483M

Hot money or foreign portfolio investment in and out of the Philippines resulted in another month of net outflow in August, more than tripling to $542 million from the net outflow in July, central bank data showed on Wednesday.

The data in August was the sixth consecutive monthly net outflow this year, starting in March, with the biggest at $569 million recorded in May. The August net outflow increased from a $160 million net outflow in July.

The latest net outflow also reversed a $483 million net inflow posted in August 2014.
The Bangko Sentral ng Pilipinas (BSP) said the increase in the total foreign portfolio investment outflow in August, which amounted to $68 million, could be attributed to profit-taking during the period.


A private bank analyst sees it as a result of market sentiment shifting in favor of investing in the US ahead of an anticipated Federal Reserve rate hike.

Before March this year, the trend in hot money flow has shown monthly net inflows of foreign portfolio investment since November 2014, when $369 million came in. The inflows peaked at $1.19 billion in February this year.

The BSP said total outflows in August rose to $1.66 billion from $1.59 billion a year earlier, while total inflows dropped to $1.12 billion from $2.07 billion in August 2014.

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.

Expected Fed hike impact
“The reversal of the flow of funds is in full effect and we note that this is happening as foreign liquidity [holders]that had come to the Philippines in search of yield have decided that it would be time to return to the West as the US economy is well on the mend and the Fed is about to hike [its key rates],” Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands (BPI), said in an e-mail to The Manila Times.

Mapa said foreign hot money outflows may to continue in the months ahead. Local players, on the other hand, are expected to support the Philippine financial markets given the country’s “superior fundamentals and growth potential.”

“Also, after the initial panic and foreign money has all been weeded out, we can expect investors to return to Philippine shores as they recognize that the Philippines continues to outshine the region in terms of growth potential and stability,” Mapa added.

Eight-month outflow
Cumulative figures for transactions during the first eight months yielded a net outflow of $64 million, narrowing from the $572 million net outflow seen in the comparable period last year.

Total outflows in the year-to-date—reaching $14.66 billion —offset total inflows of $14.59 billion in the year-ago period, the BSP said.

The central bank said about 88.7 percent of inbound investment flowed into listed stocks on the Philippine Stock Exchange such as holding firms; banks; property companies; telecommunication firms; and food, beverage and tobacco companies.

The rest of the hot money went into peso time deposits and other peso debt instruments (0.5 percent).

The United States, United Kingdom, Singapore, Luxembourg and Hong Kong were the top five investor countries for the month, with a combined share of 82.3 percent, while the US remained the main destination of outflows, receiving 81.4 percent of the total, the BSP added.

The central bank expects portfolio investment for full-year 2015 to register a net inflow of $1.4 billion and reverse a $310.21 million net outflow recorded in 2014.

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