Hot money reverses to net outflow in May

By Lawrence Agcaoili

MANILA, Philippines – More foreign portfolio investments or hot money were pulled out of the Philippines in May as investors reacted negatively to slower gross domestic product (GDP) growth and weak corporate earnings in the first quarter, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

 Data released by the BSP showed a net outflow of $24.35 million in May, reversing a net inflow of $72.81 million in the same month last year and the $51.49 million in April.

Foreign portfolio investments are speculative funds controlled by investors who actively seek short-term returns and high interest rate investment opportunities.

Inflows of speculative funds fell 16.8 percent to $1.48 billion in May from $1.78 billion in the same month last year while outflows declined 11.7 percent to $1.51 billion from $1.71 billion.

“This may be attributed to investor reaction to weak first quarter earnings of some corporations and lower-than-expected GDP data of the country for the first quarter of 2017,” the central bank said.

Philippine economic growth eased to 6.4 percent in the first quarter from 6.6 percent in the fourth quarter of last year due to weak private consumption.

The Philippines booked a net outflow of foreign portfolio amounting to $544 million from January to May, a complete reversal of the net inflow of $178.46 million in the same period last year.

Inflows declined 10.3 percent to $6.38 billion in the first five months from $7.11 billion in the same period last year.

Major sources of foreign funds are the United Kingdom, US, Singapore, Malaysia and Luxemburg. Almost 79 percent of the inflows were invested in securities traded at the Philippine Stock Exchange (PSE) while 21 percent went to peso government securities and other peso debt instruments.

Transactions in PSE-listed securities yielded a net inflow of $103 million while that of other peso debt instruments amounted to $35 million.

The peso government securities transactions resulted in a net outflow of $163 million.

On the other hand, outflows were steady at $6.92 billion in the first five months from $6.94 billion in the same period last year. Nearly 80 percent of the total outflows went to the US.

“While outflows were relatively steady, there was a substantial drop in inflows which may be attributed to continued uncertainties arising from domestic and international developments,” the BSP said.

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