Hot money rebounds in July

MANILA, Philippines - Foreign portfolio investments rebounded in July, more than offsetting the declines in the previous two months with a three-month high net inflow, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Portfolio placements – also called “hot money” for the ease they enter and exit economies – recorded a net inflow of $895.27 million last month. A net inflow indicates more investments entered the country than left.

This reversed the net outflow of $640.84 million in May and the $22.98-million withdrawals in June during the time investors were worried about the possible tapering of cheap money from US bond buying program.

For the first seven months, official data showed hot money – placed in bonds, stocks and time deposits –posted a net inflow of $2.449 billion, 31.74 percent up from previous year’s $1.859 billion.

The BSP has forecast a net inflow of $4.4 billion this year.

“Investments rose year-on-year…due to renewed optimism after the State of the Nation Address (SONA) by President Aquino as well as the US Federal Reserve’s announcements on QE,” the central bank said.

Broken down, the bulk of portfolio inflows in July were placed in the Philippine Stock Exchange (PSE), cornering 63.1 percent of the total at $1.6 billion. Holdings firms, utility companies, banks and property firms were top inflow receivers in the bourse.

Peso government securities followed with $880 million, equivalent to 34.9 percent, while time deposits attracted $50 million, accounting for two percent of total inflows, data showed.

By country, the BSP said the United Kingdom, Singapore, the US, Luxembourg and Hong Kong were top sources of hot money. The US was still top destination for outflows.

Hot money forms part of the country’s balance of payments (BOP), a gauge of the economy’s capacity to meet external trade obligations and settle foreign debts.