Hot money swings to net inflow in April

MANILA, Philippines - More speculative funds flowed into the Philippines in April, but the country continued to register a net outflow in the first four months of the year due to uncertainties in the financial market, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data showed the Philippines booked a net inflow of foreign portfolio investments or hot money amounting to $51.49 million in April, a complete reversal of the $354.05 million net outflow recorded in the same month last year and the $459.86 million outflow in March.

BSP officer-in-charge Diwa Guinigundo said the development could be attributed to investor reaction to the World Bank’s view that the Philippines would continue to be a top performer in the region.

The BSP also cited the positive sentiment about the country’s sound macroeconomic fundamentals.

Inflows inched up 3.9 percent to $1.32 billion in April from $1.27 billion in the same month last year, while outflows plunged 22 percent to $1.27 billion from $1.63 billion.

About 67.8 percent of investments registered in April went to securities listed at the Philippine Stock Exchange (PSE), about 32 percent went to peso government securities, and the 0.2 percent balance to other peso debt instruments (OPDIs).

Transactions in peso government securities and OPDIs yielded net inflows amounting to $82 million and $3 million, respectively). PSE-listed securities resulted in net outflows of $33 million.

Top sources of hot money include Singapore, United Kingdom, US, Malaysia, and Hong Kong. The US continued to be the main destination of outflows, receiving 75.7 percent of total remittances.

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.

The net inflow last April was not enough to wipeout the strong outflows booked in March with $994 million and February with $445 million.

The Philippines registered a net outflow of $516.04 million in the first four months of the year as against a net inflow of $56.26 million in the same period last year.

Inflows slightly declined to $4.82 billion from January to April this year compared with the $4.85 billion in the same period last year while outflows increased 11.5 percent to $5.34 billion from $4.79 billion.

Guinigundo said on the sidelines of the Economic Forum 2017 organized by BusinessWorld, there are still lots of volatilities in the financial market with the normalization path being undertaken by the US Federal Reserve as well as the impact of the fiscal policy under the Trump administration.

“I think we are still in the process of consolidation. Consolidation in the sense the market is still adjusting to the realities not only here, but also abroad,” he said.

The BSP deputy governor for monetary stability sector said the market is digesting all of the news from abroad and in the Philippines.

Investors were dismayed after the government reported a weaker-than-expected gross domestic product (GDP) growth of 6.4 percent in the first quarter of the year from 6.6 percent in the fourth quarter of last year.

“Yes some people thought the economic growth was less than what was expected. But under the circumstances, when you experience so much capital outflows in the first quarter of 2017 I think a growth rate of 6.4 percent remains a robust growth,” Guinigundo said.

Economic managers penned a GDP growth of 6.5 to 7.5 percent this year as expansion picked up to 6.9 percent last year from 5.9 percent in 2015 as election related spending boosted domestic demand and due to higher investments growth.

Guinigundo said the results of the latest Business Expectation Survey and Consumer Expectation Survey indicated resiliently.

 Hot money yielded a net inflow of $404.43 million last year, a complete reversal of the $599.69 million net outflow booked in 2015. Inflows reached $17.62 billion while outflows amounted to $17.22 billion.