Hot money off to a strong start

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MORE FLIGHTY foreign funds entered the Philippines in January to post a two-month high, with more investors buying local stocks amid hopes that trade tensions between the United States and China will soon be resolved.

The month saw $762.82-million foreign portfolio investment net inflows, sustaining such inflows for a third straight month, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday. The latest amount tripled from the $278.11-million net inflows in December and was nearly five times the year-ago $162.16 million.

Such investments are called “hot money” as these funds enter and leave the country with ease with any market-moving development.

This is also the biggest net inflow seen since the $832.07-million net inflows recorded in November last year.

Gross fund inflows amounted to $2.062 billion in January, which were the biggest such flows recorded since March 2018 and were 27% more than the $1.623 billion that entered the country in January 2017. These bets were partly offset by $1.299 billion in withdrawn funds that were 11% less than the year-ago $1.461 billion.

“This may be attributed to investor optimism arising from the easing trade tension between the US and China and the decline in inflation alongside the increase in net foreign buying in PSE (Philippine Stock Exchange)-listed shares in January 2019,” the BSP said in a statement.

The US and China agreed to a three-month truce and paused their retaliatory export tariffs against each other last month, kicking off with a bilateral meeting in Beijing.

Back home, the bellwether PSE index saw marked recovery as net foreign buying propelled a return to the 8,000 level.

Appetite for local shares recovered in January to account for 71.6% of the hot money tally, which in turn resulted in $506 million in net inflows. These placements mostly went to holding firms; property companies; banks; food, beverage and tobacco companies; and retail companies, the central bank said.

On the other hand, some 28.4% of the funds went to peso-denominated government securities and time deposits, which resulted in $256 million in net inflows.

Investors from the United Kingdom, the United States, Singapore, Norway and Hong Kong were the biggest sources of foreign funds, with a combined share of 74.7% of gross inflows.

At the same time, 78.4% of withdrawn investments went to the US, as market players still regarded that economy as the safe haven.

The January inflows put hot money well ahead of the BSP’s forecast of a $200-million net outflow for 2019.

Hot money settled at a $1.204-billion net inflow last year, beating the central bank’s expectations of a $100-million outflow for the year.

Market analysts attributed last year’s surprise recovery to better investor sentiment in the last few weeks of 2018, on the back of easing inflation in November and December and bargain hunting at the Philippine Stock Exchange.

On the other hand, the BSP said the implementation of the first tax reform package provided greater optimism for foreign investors to make bigger bets in local stocks last year. — Melissa Luz T. Lopez