Hot money returns in July
By Mark T. Amoguis, Senior Researcher
MORE foreign capital went into the country in July to yield a net inflow, snapping four consecutive months of outflows, the central bank reported on Thursday.
Foreign portfolio investments — also known as “hot money” because of the ease by which these funds enter and leave the economy — saw a net inflow of $15.02 million last month, reversing June’s $35.72-million net outflow but lower than the net $53.29 million that entered the country in July last year, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.
This brought the seven-month tally to a net outflow of $671.50 million, a turnaround from last year’s $458.55-million net inflow.
The central bank sees $4 billion in hot money net inflows this year.
In July alone, inflows reached $1.681 billion, higher than last year’s $959.44 million and June’s $1.412-billion inflow.
Meanwhile, outflows for that month totalled $1.666 billion versus $906.15 million a year ago and the $1.448 billion that left in June.
The bulk or 76.5% of the total investments registered in July were in companies listed on the local bourse, while the 23.5% of the total were captured by local government securities, the central bank said in a press release.
The United Kingdom, Hong Kong, the United States, Norway, and Malaysia were the top investors last month as they accounted for a combined 75.6% of the total inflows.
Meanwhile, the US cornered 77.8% of the total outflows.
The BSP said the $15.02-million net inflow for July was due to “better-than-expected inflation data for the month of June coupled with easing domestic inflation for the second quarter” this year as well as a “stronger” peso forecast.
Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc., said the net inflows logged last month was due to the local bourse breaking into the bull market territory.
“This particular breakout was said to have been driven by US Fed Chairman [Jerome] Powell’s talk of an interest rate cut by the end of July, which did happen eventually,” Mr. Asuncion said in an e-mail. “However, this mid-July euphoria did not last as the US-China trade war escalation news overwhelmed positive market perception.”
Robert Dan J. Roces, economist at Security Bank Corp., said the July data “validated the trend that market players were cautiously optimistic with the sustained strength of the peso for July, as well as the continued downtrend in inflation while looking out for developments in the trade war.”
“Moving forward, the worsening trade tensions between the US and China might keep foreign investors wary about placing their money not just in the Philippines, but with the region as well,” he said in an e-mail.
