‘Hot money’ starts year at net inflow

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday foreign portfolio investment or hot money yielded a net inflow of $301.33 million in January, reversing a net outflow of $129.85 million booked in the same month last year.

The inflow last month was also a complete reversal of the $314.65 million net outflow recorded in December after the US Fed raised interest rates by 25 basis points and hinted of a possible three rate hikes instead of two this year.

Authorities cited the sustained positive gross domestic product (GDP) growth of the Philippines over the past 72 quarters. The country’s GDP growth eased slightly to 6.6 percent in the fourth quarter from the revised seven percent in the third quarter.

This brought the average GDP growth to 6.8 percent last year, the high-end of the six to seven percent target penned by economic managers.

“This may be attributed to optimism about the new year and positive investor reaction to the announced 6.6 percent GDP growth of the country in the fourth quarter of 2016,” the BSP said.

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

  For January alone, hot money inflows jumped 39.8 percent to $1.15 billion from $820.4 million in the same period last year while outflows declined 11 percent to $845.83 million from $950.25 million.

  About 95.4 percent of the total inflows went to securities listed at the Philippine Stock Exchange (PSE) while 4.6 percent went to peso government securities and other peso debt instruments.

  The BSP said transactions for PSE-listed securities particularly banks, holding companies, property firms, utility companies as well as food, beverage and tobacco firms resulted to a net inflow of $360 million. A net inflow of $13 million was also realized for transactions involving other peso debt instruments.

  On the other hand, transaction for peso government securities yielded a net outflow of $42 million as well as that of peso time deposits with $31 million.

  The BSP said major sources of foreign portfolio investments last month were the United Kingdom, the US, Singapore, Luxemburg, and Hong Kong. These countries accounted for 79.6 percent of the total inflow.

  The US remained the major destination of hot money withdrawn from the Philippines with a share of 89.3 percent.

  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.