Net hot money inflows surge 5-fold in January 2019

MANILA, Philippines — Foreign portfolio investments or speculative funds continued to flow into the Philippines with a net inflow of $762.8 million in January, almost five times the $162.2 million net inflows recorded in the same period last year.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed inflows of hot money grew by more than 27 percent to $2.06 billion in January from $1.62 billion in the same month last year.

Foreign portfolio investments are also called hot or speculative money because of its flighty nature.

About 71.6 percent of investments registered during the month were in securities listed at the Philippine Stock Exchange (PSE). The United Kingdom, US, Singapore, Norway, and Hong Kong were the top sources of foreign portfolio investments for January, with combined share to total at 74.7 percent.

The BSP said 28.4 percent of the total inflows went to peso government securities and peso time deposits.

On the other hand, outflows slipped by 11 percent to $1.3 billion from $1.46 billion. The US continued to be the main destination of outflows, receiving 78.4 percent of total outflows from the Philippines.

“This may be attributed to investor optimism arising from the easing trade tension between the US and China and the decline in inflation alongside the increase in net foreign buying in PSE-listed shares in January,” the central bank said.

Data showed net inflows were noted for PSE-listed securities with $506 million, peso government securities with $256 million, and peso time deposits with less than $1 million.

On the other hand, transactions in other peso debt instruments resulted in net outflows of less than $1 million.

Last year, the Philippines booked a net inflow of $1.2 billion, the highest in five years, reversing the net outflow of $195.4 million in 2017.

This was the highest since 2013 when net inflows of foreign portfolio investments reached $4.22 billion.

The BSP was expecting a smaller net outflow of foreign portfolio investments amounting to $100 million last year from a net outflow of $205.05 million in 2017.

For this year, the BSP sees a net outflow of $200 million for foreign portfolio investments.

The BSP sees inflation returning back to the two to four percent target earlier than expected this year after climbing to 5.2 percent last year from 2.9 percent in 2017 due to higher oil and food prices as well as the weak peso.

The central bank raised benchmark rates by 175 basis points in five straight rate-setting meetings between May and November last year to rein in inflationary pressures. It took a breather from its tightening episode last December and this month.