Net ‘hot money’ outflow hits $361 M

The country suffered a net outflow of foreign portfolio investments in February as markets continue to reel following the US Federal Reserve’s decision to reduce its monthly asset purchases.

n a report, the Bangko Sentral ng Pilipinas (BSP) said net outflow of foreign “hot money amounted to $361.09 million in February, a reversal of the $211.65million net inflow recorded in the same month last year.

Gross inflows plunged 30 percent to $1.491 billion from $2.119 billion, while gross outflows declined three percent to $1.852 billion from $1.908 billion.

This marks the third month the country saw a net outflow of hot money, a term also used for foreign portfolio investments for the ease with which they are put in and taken out of markets.

The BSP said lower inflows last month were still due to “investors’ initial reaction to the tapering of the quantitative easing program in the United States starting January this year.

The Fed in December announced a $10-billion cut in its massive monthly purchases of US Treasuries and mortgage bonds to $75 billion. A further $10-billion reduction was announced in January, resulting in a $65-billion figure that was implemented in February.

The US central bank’s unconventional monetary policy, implemented in late 2009 following the global financial crisis, is to pump more money into the US economy.

Hot money inflows in February were invested largely in Philippine Stock Exchange- listed securities ( 88.3 percent) and peso- denominated government securities ( 11.7 percent).

Funds put into the stock market were invested in holding firms, banks, property companies, food, beverage and tobacco firms, and retail companies.

“The US, the United Kingdom, Singapore, Luxembourg, and Malaysia were the top five investor countries for the month,” the BSP said.

The US, meanwhile, remained the top destination for outflows in February.