Hot money reverts to net inflow in October

MANILA, Philippines - The net foreign portfolio investments or ‘hot money’ that flowed into the Philippines reverted to a net inflow in October amid the brighter growth projections by Moody’s Investors Service. 

Data released by the Bangko Sentral ng Pilipinas (BSP) showed a net inflow of $59.87 million in October, reversing the net outflow of $807.15 million in September.

The amount was also more than double the $27.84 million net inflow recorded in October last year. This despite the global volatile financial markets brought about by the impending interest rate hike in the US as well as negative investors’ sentiment under the Duterte administration. 

Inflows jumped 28.3 percent to $1.63 billion in October from $1.27 billion in September while outflows fell 24.52 percent to $1.57 billion from $2.08 billion. 

The BSP said the debt watcher recognized the country’s sound macroeconomic and fiscal fundamentals coupled with renewed interest in peso government securities. 

About 76.1 percent of investments registered in October were in securities listed in the Philippine Stock Exchange (PSE) and 21.8 percent were in peso government securities. 

The balance of 2.1 percent went to peso time deposits

Transactions across all types of investment instruments resulted in net inflows in the form of peso time deposits with $31 million, PSE-listed securities with $17 million, and peso government securities with $12 million. 

In all, the country recorded a net inflow of $1.33 billion in the first 10 months. This is a complete reversal of the net outflow of $360.38 million in the same period last year. 

“This was mainly due to an initial public offering by an industrial company, large net inflows in share of two holding companies and a universal bank and renewed interest in peso government securities,” the BSP said. 

Major source of foreign portfolio investments were the United Kingdom, US, Singapore, Malaysia, and Luxemburg. The US was also the main destination of outflows accounting for 88.4 percent. 

Since the start of November, foreign funds have been moving out of the PSE while the peso has continued to weaken due to external shocks brought about by the timing of the interest rate hike in the US as well as the shocking victory of Republican Donald Trump.