Hot money yields net inflow of $108 M in Nov

MANILA, Philippines — Foreign portfolio investments reverted to a net inflow in November as investors cheered the country’s successful hosting of the 31st ASEAN Summit, favorable third quarter corporate earnings, and the approval of the first package of the comprehensive tax reform program by the Senate.

Data released by the Bangko Sentral ng Pilipinas (BSP) over the weekend showed foreign portfolio investments, or hot money, yielded a net inflow of $107.71 million in November, reversing the $563.42 million net outflow in September and the $607.31 million net outflow in November last year.

However, for the first 11 months of the year, the BSP said foreign portfolio investments still yielded a net outflow of $634.53 million, reversing the net inflow of $672.73 million net inflow booked from January to November last year.

“This may be attributed to certain domestic and international developments including the interest rate hikes by the US Federal Reserve, global terrorist attacks, North Korea’s nuclear missile testing and the closure order for several mining companies in the country,” the central bank said.

Total inflows in the first 11 months declined 12.5 percent to $14.59 billion from $16.67 billion, while outflows slipped 4.8 percent to $15.23 billion from $16 billion.

The BSP now expects a net outflow of foreign portfolio investments of $2.5 billion instead of $900 million this year from a net inflow of $404.43 million last year.

The November inflow, the BSP explained, may be attributed to positive investor reaction to news of favorable third-quarter corporate earnings; outcome of and pronouncements during the recently concluded 31st ASEAN Summit; and the Senate’s approval of a higher personal income tax exemption of P250,000 annually, as part of the Senate version of the government’s tax reform program, the BSP said.

The Senate Committee on Ways and Means, chaired by Sen. Juan Edgardo Angara, approved its own version of the Tax Reform for Acceleration and Inclusion Act (TRAIN) being pushed by the Department of Finance headed by Secretary Carlos Dominguez III.

The approval came months after the House of Representatives approved the first package of the Duterte administration’s tax reform program.

The bicameral committee has already approved the versions of both the Senate and the House of Representatives and is now awaiting the signature of President Duterte.

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.

Data showed inflows slipped five percent to $1.13 billion in November from $1.19 billion in the same month last year. About 80.8 percent of inflows went to companies being traded at the Philippine Stock Exchange (PSE).

On the other hand, 19.2 percent were invested in peso government securities and 0.4 percent went to peso time deposits.

The BSP said transactions in PSE-listed companies yielded a net outflow of $105 million, while investments in government securities and other peso debt instruments resulted in net inflow of $213 million.

On the other hand, outflows in November plunged 43.3 percent to $1.02 billion from $1.8 billion in November last year.

Major sources of portfolio investments last month were the US, United Kingdom, Singapore, Norway, and Luxemburg while the US was the main destination of outflows.