Hot money reverses to net inflow in first half of 2018

MANILA, Philippines — Net inflow of foreign portfolio investments amounted to $306.25 million in the first half, a complete reversal of the $467.83 million net outflow recorded in the same period last year despite strong outflows in May and June due to investor concern on inflation as well as the weak peso and rising interest rates in the US.

Inflows rose 3.55 percent to $8.62 billion in the first six months from $8.32 billion in the same period last year, while outflows fell 5.4 percent to $8.31 billion from $8.79 billion.

Foreign portfolio investments are also called hot or speculative money because of its flighty nature.

The BSP said foreign portfolio investments yielded a net outflow of $516.16 million for the second straight month in June, reversing the net inflow of $72.56 million in the same month last year.

“This may be attributed to the US Federal Reserve’s decision to increase interest rates and investor concerns on inflation and the further weakening of the Philippine peso,” the BSP said.

For June alone, inflows plunged by 55 percent to $910.78 million from $2.02 billion.

The US, United Kingdom, Singapore, Hong Kong, and Switzerland, were the top five investor countries with a combined share to total at 82.5 percent.

The BSP said about 92 percent of investments registered during the month were in securities traded at the Philippine Stock Exchange, while the balance went to peso government securities.

Transactions for PSE-listed securities, peso government securities, and other peso debt instruments yielded net outflows of $346 million, $170 million, and less than $1 million.

Likewise, outflows in June declined by 26.6 percent to $1.43 billion from $1.94 billion as foreign portfolio investments shifted to high yielding countries.

The BSP said the outflows could be traced to the continuing trade war between the US and China coupled with sustained net foreign selling of PSE-listed securities since February of this year.

The US continued to be the main destination of outflows, receiving 82.7 percent of total remittances to date.