‘Hot money’ outflow reaches $94 million

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FOREIGN portfolio investments to the Philippines, also known as “hot money,” posted an outflow of $94.45 million in the week ending January 17, data from the Bangko Sentral ng Pilipinas (BSP) showed.

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The BSP data showed that inflows reached $360.09 million, while outflows were recorded at $454.54 million.

This brought net inflows from January 1 to 17 to reach $740.92 million, while net outflows for the period were recorded at $1.54 billion. By next year, these investments are seen to decline further to $2.1 billion.

Sought for comment, the central bank said that the outflows seen so far are possibly part of the global portfolio rebalancing.

“At points of inflection in market sentiment, there is often an exaggeration in market reaction,” BSP Governor Amando Tetangco Jr. said.

However, Tetangco believes that in the Philippines, such overshooting would soon be tempered as market participants revert to considering the country’s sound macrofundamentals that continue to be solidly in place.

The Philippine economy remains as one of the best performing economies in the Asian region, growing by 6.5 percent in the fourth quarter of 2013, placing the full-year gross domestic product (GDP) growth to 7.2 percent. This year, the government is targeting a higher GDP growth of 6.5 percent to 7.5 percent.

BSP keeps BOP projections
Meanwhile, central bank said that it is keeping its balance of payments (BOP) projection for the year despite the consequences of the market’s behavior toward the US Federal Reserve tapering of its bond buying program by another $10 billion a month starting this month.

“We are keeping the BOP projections for now, but we continuously perform internal updates. We will announce any changes at the appropriate time,” Tetangco said.

The BSP earlier announced that it is seeing BOP to remain in surplus in 2014 at $3 billion, or 0.9 percent of the country’s gross domestic product.

The central bank has also said that the country’s sound external liquidity position like the BOP is a useful buffer to counter external shocks that negatively affect the local financial market.

In 2013, the country’s BOP remained in surplus but missed the full-year target of the BSP at $5.089 billion.

The full-year BOP surplus was also lower compared to the $9.236 billion recorded in 2012.

The BOP summarizes the country’s economic transactions with the rest of the world during a period. It consists of the current account, the capital account and the financial account. A surplus arises when inflows are greater than outflows, while a deficit is incurred when outflows of dollars exceed the inflows.

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