Net outflow of ‘hot money’ almost doubled in ’15

$599.7M in portfolio investments exited Philippines on market jitters

MORE foreign portfolio investments or “hot money” flowed out in 2015, with net outflow almost doubling to $599.7 million from $310.2 million the previous year.

The net outflow recorded last year meant more foreign-led investments in bonds, deposits and stocks left than entered domestic markets.

BSP data released on Thursday showed the country attracted $19.9 billion in foreign portfolio investments last year, which was exceeded by the $20.5 billion in outflows.

The actual net outflow in 2015 was also higher than the BSP’s adjusted projection of $200 million, a reversal of the earlier forecast of $1.4 billion in net inflow.

Foreign portfolio investments are in the form of placements in publicly listed shares, government and private sector IOUs and deposit certificates.

Portfolio investments are considered shortterm bets—hence the nickname hot money—because these placements may be pulled out quickly.

Both inflow and outflow of hot money last year slid from $21.8 billion and $22.1 billion, respectively, in 2014.

“While net cumulative inflows reached $1.8 billion during the first two months of 2015, these inflows were fully offset by net outflows in the succeeding months (except for the small net inflow of $28 million in October), due mainly to profit taking in the local stock mar- ket, as well as concerns on the then imminent interest rates lift-off in the United States and slowdown of the Chinese economy,” the BSP noted in a statement.

The BSP said inflows of registered foreign portfolio investments peaked during the first quarter of 2015 due to “investor optimism arising from full-year (2014) positive corporate earnings and upgraded growth outlook for the country by the International Monetary Fund, coupled with higher investments in PSE (Philippine Stock Exchange)-listed shares due to a top-up offering of a property corporation’s shares and sale of a universal bank’s and hold- ing firms’ shares.”

As for outflows, the BSP said the bulk worth $18.6 billion or 90.5 percent of the total was comprised of withdrawals from interim peso deposits for capital repatriation as well as re- mittance of earnings.

The BSP said 77.5 percent of registered portfolio investments in 2015 was invested in PSElisted securities, while 21.7 percent was in peso government securities.

The BSP sees more of the so-called “hot money” leaving the country this year, with net outflow of foreign portfolio investments expected to reach $1.3 billion.