Hot money reverts to net inflow in Oct

More foreign portfolio investments or hot money entered the country last month, putting an end to the seven consecutive months of net outflows due to the uncertainties brought about by the impending US Fed rate hike and the economic slowdown in China, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data released by the BSP showed a net hot money inflow of $27.84 million in October compared to a net outflow of $179.9 million in the same month last year.

Hot money transactions have been recording a net outflow for the past seven months with $21.58 million in March, $31.14 million in April, $569.27 million in May, $ 521.99 million in June, $ 160.1 million in July, $542.54 million in August, and $ 323.98 million in September.

Foreign portfolio investments are also known as hot money since these are speculative capital flows that move very quickly in and out of markets.

BSP Deputy Governor Diwa Guinigundo cited the renewed investor interest in government securities last month.

“Inflows were more into the government securities market. That would explain the net inflows in October,” Guinigundo said.

BSP data showed inflows reached $1.65 billion in October, 5.9 percent lower compared to $1.75 billion in the same month last year, while outflows plunged 16.1 percent to $1.62 billion from $1.93 billion.

The BSP said 68.6 percent of investments registered in October were in investments in securities listed in the Philippine Stock Exchange (PSE) primarily in property companies, holding firms, banks, food, beverage and tobacco firms, and telecommunication companies.

However, investments in PSE-listed securities resulted in net outflows of $140 million in October.

On the other hand, the central bank said 31.2 percent went to peso-denominated government securities while the rest of the investments were in other peso debt instruments.

The central bank said transactions in peso-denominated government securities and other peso debt instruments yielded net inflows of $163 million and $5 million.

The BSP added the US, Singapore, the United Kingdom, Japan, and Belgium were the top five investor countries with combined share to total of 78.2 percent.

Likewise, the US continued to be the main destination of outflows receiving 73.2 percent of total.

For the first 10 months, the BSP said foreign portfolio investments incurred a net outflow of $360.38 million as inflows amounted to $17.6 billion, while outflows reached $17.96 billion.

“There are still a lot of uncertainties in the market. Hence, the target of a higher foreign portfolio investments could be a challenge,” Guinigundo said.

The BSP sees foreign portfolio investments hitting a net inflow of $1.4 billion this year from a net outflow of $310.21 million last year.