Hot money outflow in May largest since 1999

 Economy
Jun 142013
 

MANILA, Philippines – Foreign portfolio investments slumped the most last month since 1999 after investors shied away from emerging markets on indications US stimulus measures will be scaled down.

The Bangko Sentral ng Pilipinas (BSP) reported on Friday that portfolio placements— usually placed in the bond and stock markets— reversed to a net outflow of $640.84 million in May, the first for the year.

A net outflow indicates more investments left the country than entered. The May tally was also the highest monthly outflow based on available records from the BSP website that dated back to 1999. 

For the first five months though, portfolio investments— also called hot money for the ease they enter and exit economies— remained on the positive territory at $1.577 billion, up 74.4 percent from last year’s $904.16 million.

The BSP expects hot money net inflow to reach $3 billion this year, although that amount may be revised next week.

“The announcement of a possible scaling down of quantitative easing (QE) in the United States” drove investors to withdraw funds from emerging markets such as the Philippines last month, the BSP said in a statement.

Business ( Article MRec ), pagematch: 1, sectionmatch: 1

As the United States economy showed signs of recovery, the US Federal Reserve has signaled last month that some of its members favor a “downward” adjustment to its QE, which involves the purchase of $85 billion worth of securities every month.

The measure, instituted five years ago, was meant to flood the US economy with cheap money and lower interest rates to buoy investment and consumption and support economic growth after the financial crisis.

Broken down, bulk of the investments was placed on the Philippine Stock Exchange (PSE) at $1.8 billion, accounting for 92 percent of the total. This was followed by those in government securities ($150 million, 7.5 percent) and peso time deposits ($10 million, 0.5 percent). 

Of those in the PSE-listed companies, majority of the inflows went to holding firms ($664 million), banks ($297 million), property firms ($205 million), transportation services companies ($136 million) and food, beverage and tobacco firms ($135 million).

Hot money inflows mainly came from the United States, United Kingdom, Singapore, Luxembourg and Hong Kong, BSP said. The US continued to be the main beneficiary of outflows. 

Portfolio placements form part of the country’s balance of payments, which measure our capacity to meet external trade obligations and service foreign debts.

BSP ready to face withdrawal of stimulus measures abroad

 Economy
May 242013
 
BSP ready to face withdrawal of stimulus measures abroad

MANILA, Philippines – The Philippines stands ready to respond should the planned withdrawal of stimulus measures abroad results into capital outflows. “While there may be a possible effect of an exit strategy, I think investors will still look at the fundamentals, the prospects of individual countries. So it does not mean that suddenly they will just exit,” BSP Governor Amando Tetangco Jr. told reporters yesterday. Should it be necessary, the central bank “have the tools” to respond to possible inflow of capital to the US once it decides to scale down or stop its quantitative easing (QE) program. On Wednesday, US Federal Reserve chairman Ben Bernanke told a Senate inquiry that QE — which involves the buying of $85 billion worth of securities every month — is “providing benefits” to US economy still reeling from the effects of the 2007 financial crisis. While he warned against “premature tightening,” minutes of the meeting of the Federal Open Market Committee — the Fed’s policymaking body — showed that some members wanted to  “adjust the flow of purchases downward.” This has disgruntled Asian financial markets, causing investors to fly back to safe haven assets such as the dollar. The peso plunged to 41.69 versus the greenback on Thursday, its weakest level in almost eight months. Business ( Article MRec ), pagematch: 1, sectionmatch: 1 In the long run though, Tetangco said it should be expected that QE will stop as the US economy recovers and that Asian nations, such as the Philippines, should Read More …

Japan QE has neutral impact on Phl

 Economy
Apr 252013
 
Japan QE has neutral impact on Phl

MANILA, Philippines – The Philippines has a “neutral” exposure to Japan and the continued monetary easing on the world’s third largest economy would not likely result into excessive capital flows, the Bank of America-Merrill Lynch (BofA-ML) said in a report released yesterday. Quantitative easing (QE) from Japan may impact on Asia through exchange rates, reflation and portfolio inflows or hot money, BofA-ML. “Japan’s QE impact is more neutral for China, India, Indonesia and the Philippines,” the investment bank said. Japan is trying to boost its economy by embarking on a multi-billion yen asset purchase program known as QE to swamp the economy with money and in the process boost consumer spending to achieve inflation and growth. On the flipside though, lower rates tend to shun investors who then flock to other markets for better yields. This results into more capital inflows and, among others, more exchange rate pressures. In the Philippines, the effect is seen “neutral,” with BofA-ML noting that only 2.8 percent of total investments to bonds and equities in the country came from Japan for the past seven years. Business ( Article MRec ), pagematch: 1, sectionmatch: 1 Japanese foreign direct investments (FDI) in the Philippines accounted for only 0.3 percent of the total, the bank pointed out. The figures were lower compared with other Asian countries in BofA-ML radar. Singapore, with 30.8 percent of hot money coming from Japan, would likely experience a flood of bond and equity inflows. Vietnam, on the other hand, would likely benefit Read More …