Hot money reverses to out flow as ghost month spooks investors

MANILA, Philippines —  The ghost month as well as rising geopolitical tension between the US and North Korea spooked investors, resulting in more foreign portfolio investment outflows in August, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data showed foreign portfolio investments or hot money yielded a net outflow of $57.51 million in August, reversing the $206.47 million net inflow in July and $427.07 million net inflow in August last year.

“This may be attributed to August being considered the ghost month as well as investor reaction to rising tension between the US and North Korea,” the BSP said.

It also cited domestic concerns such as mixed second quarter corporate earnings of listed companies, the reinvigorated anti-drug campaign of the Duterte administration as well as the alleged anomalies at the Bureau of Customs.

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.

Inflows plunged 46.7 percent to $936.29 million in August from $1.76 billion in the same month last year amid the thin trading volume because of hesitancy of investors to invest.

About 85 percent of inflows went to companies being traded at the Philippine Stock Exchange (PSE) particularly banks; holding companies; food, beverage, and tobacco companies; property developers; and transport service providers.

On the other hand, 15 percent of inflows were invested in peso government securities.

The BSP said transactions in PSE-listed companies yielded net inflows while investments in government securities and other peso debt instruments resulted in net outflows.

Statistics showed outflows fell 25.3 percent to $993.8 million in August from $1.33 billion in the same month last year.

For the first eight months, the BSP said foreign portfolio investments incurred a net outflow of $318.88 million – a complete reversal of the net inflow of $1.97 billion in the same period last year.

Total inflows from January to August declined 15.1 percent to $10.69 billion from $12.6 billion while outflows inched up 3.6 percent to $11.01 billion from $10.63 billion.

“The cumulative net inflows resulted form certain domestic and international developments, such as the US air strike against Syria, global terrorist attacks, interest rate hikes by the US Federal Reserve, political turmoil in the US, tension between the US and North Korea, and the closure of several mining companies in the country,” the BSP said.