Philippines: Hot money recovers to net inflow in June

MANILA, Philippines – Foreign portfolio investments or hot money made a recovery in June, but total investments remain  in the red for most of  the first half, based on a report released  yesterday by the Bangko Sentral ng Pilipinas (BSP).

Foreign portfolio investments showed a net inflow of $79.56 million in June, reversing a net outflow of $24.35 million in May.   However, the amount was 82.3 percent lower than the $450.87 million net inflow recorded in June last year.

Foreign portfolio investments or hot money are referred to as speculative funds controlled by investors who actively seek short-term returns and high interest rate investment opportunities.

Despite the recovery in June,  the total foreign portfolio investments remained  in the red with a  net outflow  $460.83 million from January to June,  reversing the $593.87 million net inflow recorded in the first half of 2016.

“This was due to certain domestic and international developments such as the US air strike against Syria, global terrorist attacks, interest rate  increases by the US Fed, political turmoil in the US, and the closure order for several minings in the country,” the central bank said

Inflows slipped 3.3 percent to $8.32 billion from January to June   compared to the $8.51 billion in the same period last year.

For June alone, inflows of speculative funds rose 11.4 percent to $2.01 billion in June, the highest since  the $2.27 billion recorded in July last year.

“This may be attributed to positive investor sentiment relative to the anticipated resolution of the conflict in Marawi City, accelerated net foreign buying, and approval by Congress of the first tax reform program,” the BSP said.

On the other hand, outflows went up 42.6 percent to $1.94 billion in June from $1.36 billion a year ago due to profit taking and investor reaction to the decision of the US Federal Reserve to raise interest rates last March.

Economic managers decided to retain the gross domestic product (GDP) growth target for the Philippines at 6.5 to 7.5 percent this year despite the slowdown in the expansion to 6.4 percent in the first quarter from 6.6 percent in the fourth quarter due to weak private consumption.

Major sources of foreign funds are the US, United Kingdom, Singapore, Malaysia, and Luxemburg. Almost 82  percent of the inflows were invested in securities traded at the Philippine Stock Exchange (PSE) while 18 percent went to peso government securities and other peso debt instruments.

Transactions in PSE-listed securities yielded a net inflow of $311 million while that of other peso debt instruments recorded $16 million. Peso government securities transactions resulted to a net outflow of $247 million.

On the other hand, outflows rose 11 percent to $8.78 billion in the first half from $7.91 billion in the same period last year. Close to 65 percent of the total outflows went to the US.