• Oct ‘hot money’ posts $59M net inflows

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    FOREIGN portfolio investments posted net inflows of $59.87 million in October on positive prospects for the economy and renewed investor confidence, the central bank said.

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    The net inflows last month was higher than the $27.84 million a year earlier, and a recovery from the $807 million in net outflow in September.

    Bangko Sentral ng Pilipinas (BSP) data on Thursday showed the outflows slowed down by 2.8 percent at $1.57 billion in October from $1.61 billion a year earlier and by 24.3 percent from $2.08 billion in September.

    Registered investments reached $1.63 billion, 28.2 percent higher than the $1.3 billion in September, “mainly due to brighter growth projections by Moody’s Investor’s Service for the Philippines, in recognition of the country’s sound macroeconomic and fiscal fundamentals, coupled with renewed investor interest in peso government securities,” the BSP said in a statement.

    Last month, Moody’s raised its 2016 growth forecast for the Philippines as it expects spending from both the government and consumers to remain robust. The debt watcher said the economy would probably rise 6.5 percent this year.

    Year-on-year, however, there was a 0.9 percent decline in total inflows from $1.64 billion a year earlier.

    10-month net inflow

    With the net inflows in October, the cumulative FDI in the first 10 months of 2016 registered a net inflow of $1.3 billion—a reversal of the $360 million in net outflows in January to October last year.

    “This was mainly due to: an initial public offering by an industrial company; large net inflows in shares of two holding companies and a universal bank; and renewed interest in peso GS,” the BSP said.

    Sources, destinations

    Most of the registered inflows in October, or 76.1 percent, went into shares traded on the Philippine Stock Exchange—particularly of holding firms, property companies, banks; food/beverage/tobacco firms; and telecommunications companies.

    At the same time, 21.8 percent went into peso GS, and 2.1 percent into peso time deposits (TDs).

    The transactions in all instruments yielded net inflows: peso TDs ($31 million) PSE-listed securities ($17 million), and peso GS ($12 million).

    The United Kingdom, the United States, Singapore, Malaysia, and Luxembourg were the top sources of FDI, accounting for 74.1 percent.

    The US was the main destination of outflows at 88.4 percent of the total fund transfers.

    Foreign portfolio investments are considered hot money because of the ease by which the funds move in and out of a country and do not necessarily create jobs, unlike foreign direct investments that are put into assets such as factories and equipment.

    Hot money yielded a net outflow of $599.70 million last year, exceeding the central bank’s forecast of $200 million.

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