Hot money outflow in May biggest in 16 mths

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FOREIGN portfolio investment, also known as hot money, continued to leave the country in May as the central bank recorded a net outflow of $569 million during the month, the largest net outflow in 16 months.

The Bangko Sentral ng Pilipinas (BSP) said the May figure dwarfed the $21.58 million net outflow recorded in March and the $31.14 million that left the country in April.

It was the highest net outflow recorded since the $1.84 billion registered in January 2014, and reverses the net inflow of $545.08 million recorded in May last year.

Called hot money because of the ease with which they enter and leave the country, these funds are invested in Philippine financial assets and do not necessarily create jobs, unlike foreign direct investments (FDI) which are invested in assets like factories and equipment.


“This development may be attributed to profit-taking and outward remittance of sales proceeds of investments in Philippine Stock Exchange [PSE]-listed stocks and peso government securities [GS] previously kept in interim peso deposits,” the BSP stated.

Total outflows in May rose to $2.15 billion from $1.42 billion a year earlier, while inflows eased 17.8 percent to $1.58 billion from the previous year’s $1.96 billion.

The central bank attributed the decline in registered foreign portfolio investments to disappointing first-quarter corporate earnings; poor manufacturing data from China; and weaker-than-expected first-quarter gross domestic product growth of 5.2 percent from 6.6 percent in the previous quarter.

Nevertheless, cumulative figures for transactions during the five months to May 2015 yielded a net inflow of $1.16 billion, reversing the $1.42 billion net outflow in the comparable period in 2014.Year-to-date inflows of $10.35 billion offset the $9.19 billion outflows, the BSP said.

It said about 80.6 percent of inbound investment flowed into listed stocks on the PSE such as holding firms; banks; food, beverage and tobacco companies; property companies; and utilities firms. The rest of the hot money went into peso-denominated GS (19.2 percent) and other peso debt instruments (0.2 percent).

The United Kingdom, the United States, Singapore, Hong Kong, and Belgium were the top five investor countries in May with a combined share of 77 percent, while the United States continued to be the main destination of outflows, receiving 76.6 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.

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2 Comments

  1. Carl Cid Inting on

    As QE gives way to tightening and interest rate hikes, the hot money that rushed into emerging markets like the Philippines will rush to the exits. Hot money is opportunistic. It seeks where it can get a better return. As fixed income and investments in more developed countries begin to look more attractive, the Philippines will suffer hot money outflows.