Hot money inflow hits 20-mo high

MANILA, Philippines - Net inflow from foreign portfolio investments rebounded last month to its highest level in 20 months on the back of successful corporate share offerings that month, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Also called “hot money” for the ease they enter and exit economies, portfolio investments registered a net inflow of $962.75 million in July, more than triple the $301.95 million net inflow recorded in the same period last year.

This was the highest net inflow since November 2010’s $1.663 billion, data showed. The July net inflow was also a reversal of the $7.69-million net outflow recorded in May.

Hot money investments are usually placed in stocks and bonds. A net inflow means more investments entered the country than left.

BSP data showed that for July alone, gross inflows amounted to $2.155 billion, while gross outflows reached $1.193 billion.

Inflows were driven by “block sales of Ayala Corp., Ayala Land Inc. and Puregold Price Club Inc. shares as well as Banco de Oro’s stock rights offering,” the BSP said.

Outflows, on the other hand, were due to profit taking and continuing concerns on global developments.

Still, year-to-date net inflow was down 31.2 percent to $1.833 billion from $2.666 billion, data showed. Gross inflows amounted to $10.403 billion, while gross outflows reached $8.569 billion.

Most hot money went to listed shares at the Philippine Stock Exchange (PSE), BSP said.

“The main beneficiaries of investments in PSE-listed shares were: banks ($411 million), property companies ($373 million), holding firms ($322 million), diversified services ($151 million) and telecommunication companies ($145 million),” the statement said.

Most inflows came from the United Kingdom, the United States, Singapore, Hong Kong and Luxembourg. The US continued to be the main destination for outflows, it added.

In June, BSP revised its 2012 outlook for hot money net inflows to $4.5 billion from $5.7 billion due to continued risks posed by the eurozone crisis. Such inflows totaled $4.077 billion last year.

Hot money forms part of the country’s balance of payments, which measures our capacity to settle obligations and meet external requirements.