Hot money swings to positive in August despite slower GDP growth

MANILA, Philippines — Foreign portfolio investments mainly channeled in the financial markets rose in August despite the government reporting a disappointing second-quarter growth that month.

According to the Bangko Sentral ng Pilipinas on Thursday, portfolio placements registered a net inflow of $225.85 million last month, reversing the $57.52 million net outflow the same period a year ago.

A net inflow indicates more investments entered than left.

Portfolio investments—also called hot money—are placed either in bank deposits, stocks or bonds. They can easily be put in or taken back by investors depending on local and global economic and political developments that may affect their investment decisions.

In August, of particular investor concern was the reported gross domestic product growth of 6 percent in the second quarter, the weakest in three years.

Both government and private sector estimates fell higher than the actual GDP growth figure, driving some analysts to scale down their growth forecasts for the Philippines this year.

BSP data show, however, that even amid the bad news, hot money investments remained positive last month, when inflows of $1.121 billion more than offset outflows of $895.31 million. 

Broken down, the central bank said the bulk, representing 79.9 percent of total inflows, went to listed firms at the Philippine Stock Exchange, particularly property companies, holding firms, banks, food, beverage and tobacco as well as telecommunications.

The balance of 19.4 percent was invested in peso government bonds, while "less than 1 percent" entered other debt instruments and local time deposits.

By country of origin, the BSP said the US, the UK, Singapore, Hong Kong and Luxembourg funneled the most hot money inflows in August. On the flip side, the US, the world's safe haven, also remains as the top destination for outflows.

From January to August, figures showed portfolio investments already posted a net inflow of $602.01 million, a reversal of last year's net outflow worth $318.88 million.

Hot money finished in the negative in 2017, with $205.03 million net outflow.