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Net ‘hot money’ outflows drop to $231.7M in Sept

October 18, 2019

The name and logo of the Bangko Sentral ng Pilipinas are seen on the facade of the central bank’s headquarters on F.B. Harrison Ave. in Manila. (TMT File Photo)

FOREIGN portfolio investments remained in negative territory after $231.71 million of these exited the country last month, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.

In a statement, the central bank said net outflows of these investments, or “hot money” — so called because of how easily these enter and leave the economy — in September were lower than August’s $391.74 million and $440.30 million a year ago.

The Bangko Sentral took into account several local and international developments for last month’s outflows. It cited ongoing trade tensions between the United States and China; the attacks on Saudi Aramco’s oil facilities in Saudi Arabia, which triggered the biggest increase in oil prices in decades; the US Federal Reserve’s decision to cut interest rates; the impeachment inquiry against US President Donald Trump; and the reduction in interest rates and reserve requirement ratio of banks by 25 and 100 basis points, respectively.

September’s outflows of $1.53 billion was a 29.5-percent increase from $1.18 billion a year ago and a 4.5-percent decrease from August’s $1.60 billion.

The US remained the main destination of repatriated funds, accounting for 75 percent.

Registered gross foreign portfolio investments reached $1.30 billion last month, up 75.1 percent from $743.31 million a year ago. Inflows also rose by 7.2 percent from $1.21 billion a month ago.

The bulk, or 80.2 percent, of such investments went to Philippine Stock Exchange-listed securities — property companies; holding firms; banks; food, beverage and tobacco companies; and transportation firms. Peso government securities accounted for the rest.

“The United Kingdom, the United States, Singapore, Malaysia, and Luxembourg were the top five investor countries for the month, with combined share to total at 72.3 percent,” the BSP said.

US dollar banknotes (TMT File Photo)

Taking preliminary results for the first four days of September into account, year-to-date hot money flows were negative at a net outflow of $1.33 billion, reversing the P74.67-million net inflow a year ago.

Speculative funds invested in financial assets are a component of the Philippines’ balance of payments, which summarizes the country’s economic transactions with the rest of the world over a certain period.

The Bangko Sentral expects this type of investment to post a net inflow of about $4 billion this year.

Last year, hot money hit a net inflow of $1.204 billion — the highest in five years and a turnaround from 2017’s $195.40-million net outflow.

The 2018 tally was also better than the BSP’s forecast of a $100-million net outflow and was the largest net inflow since 2013’s $4.225 billion.

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