MANILA – The flight of foreign portfolio investments or “hot money” accelerated further as net outflows more than doubled in June, mainly due to the interest rate hikes in the US.
Data released by the Bangko Sentral ng Pilipinas (BSP) show foreign portfolio investments posted a net outflow of $516 million, more than twice the $206-million net outflow recorded in May.
“This may be attributed to the United States Federal Reserve’s decision to increase interest rates and investor concerns on inflation and the further weakening of the Philippine peso,” the central bank said.
Land Bank of the Philippines market economist Guian Angelo Dumalagan noted that the net outflow resulted from the gradual increase in US policy rates, which makes US returns more competitive.
Dumalagan also cited the lingering tension between US and China, which is reducing investors’ appetite for riskier emerging market assets.
The latest “hot money” net outflow is also a turnaround from the $73-million net inflow registered in June 2017.
Foreign portfolio investment is also called hot money because of the ease by which the fund enters and exit markets.
An inflow means more funds entered the Philippines than flowed out, while an outflow shows that more funds exited the country.
Total inflows reached $911 million, down 24.9 percent and 54.8 percent month-on-month and year-on-year, respectively.
Total outflows stood at $1.42 billion, which closely reflected last month’s level of $1.4 as investors reacted 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, according to the BSP.
Year-on-year, outflows declined by 26.6 percent from $1.9 billion in June 2017.
“The US continued to be the main destination of outflows, receiving 82.7 percent of total remittances to date,” the central bank said.
According to the BSP, the US, United Kingdom, Singapore, Hong Kong, and Switzerland were the top five investor countries for June, accounting for a combined share to total of 82.5 percent.
About 92 percent of investments registered last month were in PSE-listed securities mainly to holding firms, property, banks, food, beverage and tobacco firms, and utilities companies; 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, respectively. (GMA News)
