• Hot money records $545M net inflows

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    HOT money flow, or the movement of portfolio investments in and out of the Philippines, resulted in a net inflow in May.

    Data from the Bangko Sentral ng Pilipinas (BSP) released on Wednesday showed that transactions for the month resulted in a net inflow of $545.08 million, a reversal of the $640.84 million net outflow a year earlier.

    Month-on-month, the level of hot money transactions in May was an improvement of the $324.77 net inflow in April, but did not give an explanation to the higher net inflows recorded during the month.

    Outflows reached $1.42 billion in May, an 8.1 percent year-on-year decline from $2.64 billion a year earlier. Inflows were recorded at $1.96 billion, reflecting a minimal decline from the previous year’s $2 billion level.

    The central bank data added that about 75.2 percent of the investments went to Philippine Stock Exchange (PSE)-listed securities such as property companies, banks, holding firms, food, beverage and tobacco firms, and telecommunication companies; 20.7 percent went to peso government securities (GS), while 4.1 percent in peso time deposits.

    “The United Kingdom, Singapore, the United States, Hong Kong and Luxembourg were the top five investor countries for the month with combined share to total of 78.1 percent, while the United States continued to be the main destination of outflows, receiving 91.6 percent of total,” the BSP said.

    Justino Calaycay, analyst at the Accord Capital Equities Corp. believes that the growth of foreign portfolio investments is a result of the political and economical efforts made by the government.

    “For one, it wasn’t really a big surprise that portfolio investment continues to grow given the sustained rosy outlook for the domestic economy,” Calaycay replied in an e-mail to The Manila Times also on Wednesday.

    The analyst added that the rosy outlook for the Philippine economy was coupled with the high trust rating the administration continues to enjoy, and the success it has made with respect to reforms, both politically and economically.

    He cited government actions such as the filing of cases against alleged corrupt officials no matter the rank and the fiscal efforts that have reduced the country’s deficits and debt burden.

    “As long as the administration is able to stay on track on its agenda, business will be good and investments will continue to flow,” he added.

    Calaycay suggested that the negative impact of the lower than expected 5.7 percent growth of the economy at the start of 2014 on the flow of hot money is only “temporary” as people will still look at the positive implication that the country’s economy continues to grow despite the difficult external environment.

    “Our exports have rebounded but are still not at pre-crisis levels. I am quite confident that monies, both portfolio and direct investments, will still be flowing positively at least in the next one and a half to two years or until President Benigno Aquino 3rd steps down from Office,” he said.

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