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Hot money flows at 17-month peak

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by August 12, 2016 General
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By Melissa Luz T. Lopez, Reporter

Posted on August 13, 2016

FOREIGN portfolio investments surged in July to a 17-month high, pulling the seven-month tally to a level more than triple last year’s inflows, data from the Bangko Sentral ng Piipinas (BSP) showed.

July “hot money” — called so given the ease by which the funds enter and leave markets — reached $1.067 billion, double the $450.87 million net inflow seen in June and reversing a $160.1 million outflow posted a year ago.

The July figure is the highest since the $1.19 billion recorded in February 2015. It also marks the third straight month of inbound capital seen since May, which showed a steady streak of weekly net inflows following the May 9 elections.

Broken down, foreign investors brought in $2.269 billion capital in July alone, also the highest in over a year. This was partially offset by outflows of $1.203 billion, according to central bank data.

In a statement, the BSP said the capital surge was mainly due to a public float by an industrial firm, coupled with renewed interest in peso-denominated debt papers.

Cemex Holdings Philippines, Inc., a local unit of the Mexican cement giant Cemex S.A.B. de C.V., held its initial public offering last month with P25.13 billion worth of shares, divided into a 70% tranche for foreign investors and 30% for locals.

July’s investments brought the seven-month tally to $1.647 billion, over three times more than the $478.29 million net inflow logged during the comparable period in 2015 which came despite profit-taking among firms, concerns about China’s slowdown, and a continued oil price slump, the central bank said.

Earlier, BSP Deputy Governor Diwa C. Guinigundo said foreign investors searching for yields found the Philippines a “very good” destination given its strong growth and a sound macroeconomic footing amid lackluster prospects in advanced economies.

The United States announced a weaker-than-expected performance during the second quarter. Meanwhile, growth prospects in Europe also remain weak, suffering the blow from the United Kingdom’s decision to leave the European Union. A tamer response by the Bank of Japan to Prime Minister Shinzo Abe’s call for increased stimulus for their economy also disappointed world markets, Reuters earlier reported.

Most of the hot money flows seen during the month went to publicly-listed firms, particularly to businesses engaged in construction, infrastructure, and allied services; property companies; holding firms; banks; and food, beverage, and tobacco companies, which yielded $821 million.

Meanwhile, nearly a fifth of the inflows were placed in government securities, which generated $246 million, the BSP added.

The biggest investments came from the United Kingdom, United States, Singapore, Hong Kong, and Luxembourg at 79.5%, while most of the outbound capital went back to the US.

The BSP expects hot money to log a $1.1-billion net outflow by yearend, slightly better than the original $1.3-billion outflow forecast. In 2015, the Philippines recorded about $600 million in outflows.

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