Oct hot money net outflow $179.8M

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The movement of portfolio investments to and from the Philippines posted net outflows in October, still reflecting the impact of the US tapering of its economic stimulus program, the central bank said.

Foreign portfolio investments or “hot money” transactions in October showed a net outflow of $179.85 million, in stark contrast to the $969.33 million net inflow a year earlier, according to data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday.

“These developments may be attributed to profit-taking and the end of the United States’ QE [quantitative easing]program in October,” the BSP said.

On a month-to-month basis, however, the level of hot money outflow in October eased from the -$324.42 million net outflow in September.


Outflows reached $1.93 billion, compared with $1.53 billion a year earlier, while October inflows were recorded at $1.75 billion from the previous year’s $2.5 billion.

The central bank traced the decline of hot money inflows to the investors’ reaction to the International Monetary Fund’s (IMF) downgrade of its 2014 growth forecast for the global economy and the continuing unrest in Hong Kong.

The IMF has cut its forecast for global growth in both 2014 and 2015 to 3.3 percent and 3.8 percent, respectively. The IMF said geopolitical tensions, stagnating growth and concerns over growing shadow banking are presenting downside risks to economies, which will eventually pose threats to investors.

According to the central bank, transactions in Philippine Stock Exchange (PSE)-listed securities resulted in net outflows of $222 million compared to the $75 million outflows last month, while peso government securities yielded a net inflow of $42 million, a turnaround from the $249 million net outflow in September.

About 71.4 percent of the investment went to PSE-listed securities such as holding firms, banks, property companies, telecommunication firms, and utilities companies, while 28.6 percent went to peso-denominated government securities, the BSP data said.

“The United Kingdom, the United States, Singapore, Luxembourg, and Malaysia were the top five investor countries for the month, with a combined share of 83.3 percent of total inflows. The United States continued to be the main destination of outflows, receiving 72.3 percent of the total,” the BSP said.

Last year, foreign portfolio investments registered a net inflow of $4.2 billion, surpassing the revised $3.2-billion target of the BSP for 2013. For 2014, these registered investments are expected to decline to $1.5 billion, the net of $1.8 billion in projected inflows and $300 million in outflows.

Foreign portfolio investments are one of the components of the country’s balance of payments (BOP), which summarizes the country’s economic transactions with the rest of the world over a certain period. The central bank has forecast a narrower BOP surplus this year at $1.1 billion.

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