MANILA, Philippines – Foreign portfolio investments or hot money recorded a net outflow in September as funds return to the US, which is showing signs of economic recovery.
Net hot money outflow amounted to $324.12 million in September, a reversal of the $682.73-million net inflow recorded in the same month last year. Foreign portfolio investments are also called hot money for the ease with which they enter and leave a country.
Gross inflows in September went down 17 percent to $2.15 billion from $2.6 billion last year, while gross outflows climbed 29 percent to $2.47 billion from $1.92 billion.
“Registered investments were lower … due to the effects of the tapering of the quantitative easing program of the United States,” the BSP said.
Emerging markets have seen a surge in capital outflows since May last year, when the US Federal Reserve hinted it may start cutting back its monthly asset purchases. Speculation on the timing and volume of the tapering sent waves of volatility to global financial markets as investors rebalanced their portfolios.
January marked the actual start of the Fed’s reduction in its asset purchases, which is now seen ending in October. But markets have remained volatile as investors brace for the rise in global interest rates following the end of the Fed’s stimulus.
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The BSP said the bulk or 81.5 percent of the hot money inflows in September went into Philippine Stock Exchange-listed securities, mainly telecommunication firms, holding firms, banks, property companies, and food, beverage and tobacco companies.
The remaining 18.5 percent of the portfolio investments were put into peso-denominated government securities.
The central bank said the United States, the United Kingdom, Singapore, Luxembourg, and Ireland were the top five investor countries during September. United States also continued to be the main destination of outflows.
In the nine months to September, the country saw a net hot money outflow of $896.95 million.
The BSP has forecast foreign portfolio investments to amount to a net inflow of $1.5 billion by year-end, 64 percent below the $4.22 billion recorded in 2013.
