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Sept hot money net outflow hits 32-mth high

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by October 13, 2016 General

FOREIGN portfolio investments posted a net outflow of $807.15 million in September, the highest in 32 months, the latest data from the Bangko Sentral ng Pilipinas showed.

The net outflow last month was more than twice the $323.98 million a year earlier, and was a complete turnaround from the $427.07 million in net inflow in August.

It was the highest since January 2014, when the net outflow hit $1.84 billion.

BSP data on Thursday showed the total inflow slowed down by 6.9 percent to $1.27 billion in September from $1.36 billion a year earlier and by 27.5 percent from $1.75 billion last August.

The BSP noted several developments affecting foreign portfolio investment: the lingering uncertainty about the timing of the next interest hike in the United States, the bombing in Davao City earlier in September which prompted the government to declare a “state of lawless violence” in the country, and the European Central Bank’s decision to discontinue its bond-buying program. These “weighed down on investors.”

Year-on-year, total outflows worsened by 23 percent to $2.08 billion in September from $1.69 billion, and from $1.32 billion in August “due to profit-taking” in the stock market.

9-month net inflow

Despite the net outflow in September, the cumulative numbers in the first nine months of 2016 reached a net inflow of $1.26 billion—a reversal of $413.93 million in net outflow in January to September last year.
The nine-month inflows of $13.74 billion helped offset total outflows of $12.48 billion, the BSP said.

Fund transfers

Most of the registered inflows in September, or 88.7 percent, went to the shares traded on the Philippine Stock Exchange—particularly of holding firms, property companies, banks, telecommunications companies, and food/beverage/tobacco firms.

At the same time, 11.3 percent went to peso government securities.

The transactions in all instruments yielded net outflows: PSE-listed securities ($654 million), peso GS ($153 million), and other peso debt instruments (less than $1 million).

The United Kingdom, the United States, Singapore, Malaysia, and Luxembourg were the top five sources of inflows, accounting for 72.3 percent.

The US was the main destination of outflows, accounting for 76.7 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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