‘Hot money’ inflows beat 2016 forecast despite Dec. outflow

MORE foreign capital fled than entered the Philippines in December, reflecting market jitters in the face of fresh rate hike in the United States, although the full-year tally bested government expectations to settle in positive territory, according to central bank data.

Foreign portfolio investments — also called “hot money” due to the ease by which such funds enter and leave markets — posted a $365.49-million net outflow in December.

That marked the second straight month of negative flows following November’s $ 607.31million net outflow and is double the December 2015’s $170.52-million net outbound capital.

Hot money continued to flee the Philippines through all five weeks of December, a trend seen since early November, likely due to uncertainty ahead of the US Federal Reserve’s anticipated rate hike.

“The outflows were a direct offshoot of external uncertainties surrounding the US Fed monetary prospects and the thrust of the US President- elect’s trade, immigration and business policies,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said by text.

Foreign firms brought in some $1.004 billion in December, the smallest amount since January’s $820.4-million inflow which came after the first 25-basis-point hike by the US Fed in December 2015.

December’s inflows were offset by $1.37 billion pulled out by offshore investors, according to BSP data.

Despite the December figure, full-year “hot money” saw a net inflow of $353.59 million — a turnaround from 2015’s $599.69-mil- lion net outflow — beating the central bank’s forecast of $1.1 billion in outbound capital.

In a statement, the BSP attributed 2016’s positive figure to an industrial firm’s initial public offering (IPO), capital investments in two holding companies and a universal bank, and “renewed interest” in peso debt papers.

July saw the biggest gross capital inflows totaling $2.269 billion, as Cemex Holdings Philippines,

Inc., a local unit of the Mexican cement giant Cemex S.A.B. de C.V., held its P25.13billion IPO.

Total fund inflows reached $17.574 billion for the year, but was partially offset by $17.221 billion withdrawn by foreign firms. These amounts, however, were less than 2015’s $19.926-billion inbound and $20.526-billion outbound flows.

“About 96.8% of total outflows represented capital repatriation while the remaining 3.2% pertained to remittance of earnings,” the BSP statement read.

The United States, United Kingdom, Singapore, Luxembourg and Hong Kong were the biggest sources of capital last year with a cumulative 76.7% share, while 83.1% of outflows went back to the US.

The BSP said bulk of investments — 82.5% — went to companies listed on the Philippine Stock Exchange (PSE), even as transactions in PSE-listed securities yielded a $150-million net outflow.

Peso-denominated government securities, Peso time deposits and other debt papers denominated in the local currency saw net inflows of $465 million, $33 million and $6 million, respectively.

Sought for comment, two economists said the Fed rate hike largely drove capital flows in December.

“The US Fed’s rate hike largely influenced the outflows. Although general investor sentiment was obviously positive, both domestic and external uncertainties contributed to the ‘wait-and-see’ attitude of investors toward the end of 2016,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said in an e-mail.

Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, said bets of stronger US growth on fiscal stimulus promised by Presidentelect Donald J. Trump may have also spurred more outflows as US investments became “relatively more attractive.” “The full-year hot money tally, however, remained positive as strong domestic economic activity last year invited higher inflows in the first half of 2016,” he said.

Looking ahead, Angelo B. Taningco, Security Bank economist, said he believed “net inflows can be sustained this year, especially if the deficit spending program of the government will accelerate and the overall business environment becomes more conducive for foreign investors.”

The BSP expects a $ 900- million net outflow in hot money this year.