Hot money reverses to net inflows in November
The country’s foreign portfolio investments, also known as hot money, amounted to a net inflow of $832 million in November, reversing the $68-million net outflows of the previous month. The November inflow higher compared to same time last year of $108 million.
The Bangko Sentral ng Pilipinas (BSP) said the higher net hot money inflows “may be attributed to positive investors’ reaction to the following: Decreasing global oil prices; BSP’s decision to raise its policy rate; and progress on the rice tariffication bill.”
The BSP said that these developments are all expected to curb inflation which reached a peak of 6.7 percent in September-October before falling to six percent in November. To temper price pressures, the Monetary Board hiked benchmark rates five times in a row to a cumulative 175 basis points by November 15. With inflation seen at below four percent by end-first quarter next year, the BSP decided to pause on its interest rates’ adjustment last week.
The higher net inflow in November was also attributed to the two-day state visit of Chinese president Xi Jinping since, according to the BSP, the visit should “further deepen ties with China in terms of diplomacy and business development.”
Data from the BSP showed that year-to-date transactions resulted in net inflows of $926 million compared to the $635 million net outflows for the same period last year (January to December 2017). For the month of November, the total registered investments totaled $2 billion, 80.8 percent higher than what was reported same time last year of $1.1 billion. It is also higher than the $953 million recorded in October this year.
Based on BSP data, 66.8 percent of investments in November were placed in listed securities such as in food, beverage and tobacco companies, holding firms, property companies, banks, and utilities. Net inflows amounted to $322 million.
Another 33.2 percent were invested in peso government securities and these yielded net inflows of $510 million.
Of the top five investing countries, the UK topped the list, followed by Singapore, the US, British Virgin Islands and Cayman Islands. Combined, about 83.5 percent of the funds were traced from these areas.
As for outflows, the US is still the
main destination of these withdrawn funds or 84.8 percent of total. Outflows in November reached $1.2 billion, up from $1 billion recorded in both October 2018 and November 2017.
The BSP on Friday revised lower its projected hot money flows for 2018 to a net outflow of $100 million from $900
million announced in May, also as net outflows. For 2019, it expects another $200-million net outflows in foreign portfolio investments.
Portfolio investments are defined by the BSP as the “cross border transactions and positions involving debt or equity securities, other than those included
in direct investment or reserve assets.”
It includes sale and purchase of debt such as bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities, money market instruments, and similar instruments normally traded in the financial markets. (LCC)