Hot money reverts to net inflow in October

MANILA, Philippines — More speculative funds flowed into the Philippines last month due to renewed investor confidence amid favorable domestic and international developments, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data released by the central bank showed foreign portfolio investments or hot money yielded a net inflow of $104.53 million in October, reversing the net outflow of $67.83 million recorded in the same month last year.

The Philippines booked net outflows for the months of August and September.

Inflows jumped by 31.5 percent to $1.25 billion in October from $952.6 million, while outflows went up by 12.5 percent to $1.15 billion from $1.02 billion.

About 81.9 percent of investments registered in October were in securities listed at the Philippine Stock Exchange (PSE), while the remaining 18.1 percent went to investments in peso government securities.

The United Kingdom, the US, Singapore, Luxembourg and Malaysia were the top five investor countries with combined share to total of 73.9 percent.

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

The BSP traced the higher inflows to the series of initial public offerings (IPOs) by firms in the industrial and service sectors at the Philippine Stock Exchange (PSE) last month.

The IPOs of home furnishing retailer AllHome Corp. owned by the family of billionaire Manuel Villar Jr. raised close to P15 billion, while that of integrated coconut product manufacturer and exporter Axelum Resources Corp. raised P4 billion.

Other favorable developments in the domestic scene include the easing of inflation to a 43-month low of 0.8 percent in October from 0.9 percent in September, bringing the average to 2.6 percent in the first 10 months of the year.

This allowed the BSP to slash interest rates by 75 basis points this year, partially unwinding a tightening episode that saw rates rise by 175 basis points last year.

The BSP also reported the Philippines yielded a net outflow of $1.22 billion from January to October, reversing the net inflow of $93.89 million in the same period last year.

Inflows went up by 15.1 percent to $14.29 billion in the first 10 months from $12.41 billion in the same period last year, while outflows jumped by nearly 26 percent to $15.52 billion from $12.32 billion.

Based on its latest assessment, the BSP expects a net inflow of foreign portfolio investments amounting to $4 billion instead of a net outflow of $200 million this year.