Hot money net inflow surges in Aug. — BSP

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By Melissa Luz T. Lopez, Senior Reporter

MORE FOREIGN FUNDS entered the Philippines in August to mark a four-month high, with hawkish cues from the Bangko Sentral ng Pilipinas (BSP) perking up investor appetite.

Foreign portfolio investments posted a $225.85-million net inflow last month that was four times July’s $53.29 million and marked a turnaround from the $57.52-million net outflow recorded in August 2017.

This tally is the biggest inflow seen since April’s $279.29 million, according to latest available central bank data.

These flighty investments are often called “hot money,” as these funds enter and leave the country with ease in the face of developments and news.

Foreigners brought in $1.121 billion in funds in August, 16.9% more than July’s $959.44 million inflows seen and a fifth bigger than the $936.28-million inbound flows a year ago.

Such inflows were matched by $895.31 million in outbound funds, improving from the $993.8 million that left the country in August 2017. This is also the smallest outflow seen since January last year, according to BSP data.

In a statement, the BSP said the bigger hot money inflows reflected positive investor response to good second-quarter corporate earnings and the “forthcoming infrastructure initiatives” of the Duterte administration.

The recent resumption of trade talks between the United States and China also helped lift market sentiment, the central bank added.

Investments peaked in the second week of August when gross inflows reached $296.4 million that were partly offset by $185.22 million in outbound funds.

“It is also important to stress that the week of August 6-10 was the week that the BSP announced that it will raise rates by 50 basis points, signaling a more hawkish stance. This particular event has encouraged financial market gains,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.

“With the possibility that the US and China are starting fresh trade negotiations, it may further encourage investment inflows,” he added.

While the government reported a disappointing six percent economic growth for the second quarter on Aug. 9, Mr. Asuncion noted that the Philippines’ macroeconomic fundamentals remain attractive “despite rising inflation and uncertainties of the external environment.”

Foreign investors were particularly upbeat about investing in peso-denominated government securities, yielding $180-million net inflows during the month.

This was followed by $39-million net inflows from shares of stock of listed companies.

Other peso-denominated debt instruments got $6-million net inflows.

The August figure brought the year-to-date hot money investments to a $602.01-million net inflow, a turnaround from the $318.88-million outbound capital in last year’s counterpart eight-month period.

The central bank expects hot money at a $900-million net outflow by yearend, which would be wider than 2017’s $205.03-billion net outbound funds amid financial market uncertainties.