The movement of foreign portfolio investments – or hot money – in the Philippines recorded a net outflow of $24.35 million in May, reversing a net inflow in April as investors exited the markets in reaction to lower-than-expected first-quarter economic growth and corporate earnings, the central bank said.
The net outflow of hot money in May wiped out net inflows of $51.49 million in April and $72.81 million in May 2016, the Bangko Sentral ng Pilipinas (BSP) said in a report on Friday.
Total inflows reached $1.48 billion during the month, while total outflows stood higher at $1.50 billion in April.
“This may be attributed to investor reaction to weak first-quarter earnings of some corporations and lower-than-expected GDP [gross domestic product]data of the country for the first quarter of 2017,” the BSP said.
The total amount of hot money that flowed in during May rose 12 percent from $1.32 billion in April but fell 16 percent from $1.78 billion a year earlier, it said.
The total amount of outflows rose 19 percent from $1.26 billion in April but dropped 11 percent from $1.71 billion a year earlier.
The Philippine economy lost some steam in the first quarter of 2017, with gross domestic product (GDP) growth moderating to 6.4 percent from 6.6 percent in the preceding quarter and 6.9 percent a year earlier. The weakening was traced to a slowdown in government spending and the absence of election spending which boosted growth in 2016.
Net outflow in 5 mths
In the first five months of the year, hot money registered a net outflow of $543.79 million, reversing a $178 million net inflow a year earlier.
During the five-month period, foreign portfolio investment inflows reached a total of $6.38 billion, down from $7.11 billion a year earlier, while outflows totaled $6.92 billion, down from $6.93 billion in the comparative period.
“While outflows were relatively steady, there was a substantial drop in inflows, which may be attributed to continued uncertainties arising from domestic and international developments, such as the United States air strike against Syria, global terrorist attacks, the interest rate increase by the US Federal Reserve in March 2017, and the closure order for several mining companies in the Philippines,” the BSP explained.
BSP data showed 79.1 percent of hot money was invested in securities listed on the Philippine Stock Exchange, mainly in holding firms, banks, property companies, food, beverage and tobacco firms and utilities companies; 18.4 percent went to peso government securities (GS); and the 2.5 percent balance was placed in other peso debt instruments (OPDIs).
“Transactions in PSE-listed securities and OPDIs yielded net inflows of $103 million and $35 million, respectively, while investments in peso GS resulted in net outflows of $163 million,” the BSP also pointed out.
The United Kingdom, United States, Singapore, Malaysia and Luxembourg were the top five investor-countries in the Philippines, with a combined share-to-total of 76.9 percent. The United States continued to be the main destination of outflows, receiving 79.2 percent of total remittances.
Foreign portfolio investment is also called hot money because of the ease with which the funds move in and out of a country. The investment does not necessarily create jobs, unlike foreign direct investments, which are used to build factories and buy capital equipment.