July ‘ hot money’ net inflows biggest in six months — BSP

MORE foreign capital entered the Philippines in July to post the biggest net inflow in six months, the central bank reported yesterday.

Foreign portfolio investments, also called “hot money” given the ease by which these funds enter and leave markets, posted a $206.47-million net inflow last month, rising from the $72.56 million in net inbound capital logged in June, according to data released by the Bangko Sentral ng Pilipinas (BSP).

But the figure was only a fifth of the $1.067-billion net inflows recorded in a year ago, which came on the back of an initial public offering by the local unit of a Mexican cement giant Cemex.

In a statement, the BSP attributed the sustained fund inflows to positive investor senti- ment towards the Philippines following President Rodrigo R. Duterte’s second Congressional address on July 24 alongside June’s 2.8% inflation rate reported that month that was softer than May’s 3.1%.

Foreigners invested $1.434 billion in the Philippines last month, which was partially offset by $ 1.228 billion which they took out of the country. The figures compare to the year-ago $2.269-billion gross placements and $1.203-billion outflows. Inflows last month peaked at $565.17 million between July 24 and 28 — the week of Mr. Duterte’s state of the nation address.

Strong net foreign buying also buoyed Philippine financial markets, the central bank said, as

the Federal Reserve opted to maintain interest rates in the United States after a hike in June.

The peso hovered around P50 to the dollar last month, touching its weakest value then in over a decade at P50.94 on July 19. The central bank has since then not sounded alarm on the peso’s depreciation, saying that the local currency simply reflects market volatility and will not see a “free-fall”.

Last month also saw Congress approve the extension of military rule in Mindanao to yearend as government forces struggle to take Marawi City back from Islamic militants after more than two months of battle.

Some 90.5% of the flighty capital were invested in shares of listed firms, mainly to food, beverage, and tobacco companies; holding firms; banks; property firms; and utilities, which yielded $244 million in net inflows.

About a tenth went into government debt papers, resulting in an $18-million net outflow, the central bank said.

Despite two straight months of inflows, the year- to- date tally ( including Aug. 1- 4) still settled at a $202.24-million net outflow, a reversal from the $1.744-billion net inflow recorded in 2016’s comparative period.

Geopolitical threats and policy uncertainty continued to dampen investor appetite this year, the BSP said, citing the US air strike in Syria, political turmoil in the United States, as well as bets on the Fed’s next tightening moves. At home, the wide-ranging crackdown on miners earlier in the year spooked foreign investors.

The BSP expects hot money to post a $ 900- million net outflow this year due to external headwinds, a reversal from 2016’s $404.43-million net inflow.

More permanent inflows of foreign direct investments stood at a net amount of $3.006 billion as of end-May, down 23.8% from the previous year. —