MANILA, Philippines - The country recorded a net outflow of foreign portfolio investments or hot money in January, a reversal of net inflow posted a year ago as investors shied away from emerging markets such as the Philippines following the US Federal Reserve’s decision to reduce its massive bond buying program.
The Bangko Sentral ng Pilipinas (BSP) said there was a net outflow of $1.844 billion in January, a turnaround from a net inflow of $1.27 billion in January 2013.
Gross inflows fell 55 percent to $1.277 billion from $2.81 billion, while gross outflows surged 103 percent to $3.121 billion from $1.539 billion.
Foreign portfolio investments are called hot money for the ease with which they are put in and taken out of markets.
The central bank said the lower inflow of portfolio investments was due to investors’ bearish view on emerging markets as the US started the tapering of its quantitative easing program in January.
The Fed in December finally announced a $10-billion cut in its massive monthly purchases of US Treasuries and mortgage bonds to $75 billion starting in January.
A further $10-billion reduction was announced in January, resulting in a $65-billion figure that started this month.
The US central bank’s bond buying program was instituted in late 2009 following the global financial crisis. It was meant to flood the US economy with cheap money and lower interest rates to buoy investment and consumption and support economic growth after the financial crisis.
The BSP said hot money inflows in January largely went to Philippine Stock Exchange-listed securities (78.7 percent), peso-denominated government securities (18.6 percent), and peso time deposits (2.7 percent).
The central bank said investments in the stock market benefitted banks, holding firms, property companies, food, beverage and tobacco firms, and telecoms.
The top investor countries last month were the United States, the United Kingdom, Sinapore Luxembourg, and Belgium. The United States, meanwhile, remained the main destination of hot money outflows from the Philippines.
The country recorded a net hot money inflow of $4.225 billion last year, up eight percent from $3.911 billion in 2012. The level also breached the BSP’s assumption of $3.2 billion.
For this year, the central bank expects a net hot money inflow of $2.1 billion.