Hot money posts $397M net outflow in 7 mos.

By Ruben Hortelano

08/15/2008

Hot money or portfolio investments continue with a general flight out of the country resulting in $397 million in net outflow this year until July against a $3.6 billion net inflow during the same period last year, Bangko Sentral ng Pilipinas (BSP) data released yesterday showed.

The BSP said the reversal in the trend on short-term investments, mostly invested in the stock and capital markets, was traced to continuing risk aversion as a result of tightening of credit market conditions sparked by the US subprime mortgage crisis and the surge in prices of oil and other commodities.

Investments in listed shares posted a net inflow of over $1.3 billion, while peso-denominated government securities recorded a $600,000 net inflow and a $4.1 million net inflow for money market instruments, while placements in peso bank deposits showed a net outflow of $1.7 billion.

For July alone, portfolio investments managed a small net inflow of $20.2 million.

Gross investment flows were also slowing down with portfolio investments totaling $5.8 billion in seven months, which was only more than half or 59 percent of the more than $9.8 billion recorded a year ago.

Investments in the Philippine Stcoks Exchange (PSE)-listed shares of $3.9 billion (62 percent of which went to telecom-munications, property and holding firms) accounted for 67 percent of the total and were less than half the over $8.1 billion invested a year ago.

Investments in peso deno-minated government securities of nearly $1.4 billion, making up 23 percent of the total, fell behind last year’s almost $1.6 billion total.

Placements in bank deposits rose 285 percent to $546.7 million to account for a 9 percent share of total investment flows.

Placements in money market instruments made up the 1 percent balance, according to the BSP.

The United Kingdom, United States and Singapore remained the top three investor countries and collectively contributed 69 percent of investment funds during the period, it added.

BSP Gov. Amando Tetangco Jr. said a net inflow was posted for July mainly as a result of an easing of oil prices, the strengthening of the peso and the improving fiscal position of the government.

Gross capital outflows amounted to over $6.2 billion, only slightly lower than the level recorded last year and resulted from withdrawals of investments from listed shares, making up 41 percent of total; government securities, 22 percent; and peso bank deposits, 37 percent.

Registration of foreign investments with the BSP entitles the investor to buy foreign exchange from the banking system for capital repatriation and remittance of dividends and earnings that accrue on the investments.

On a gross basis, registered foreign portfolio investments totaled $577.3 million, 79 percent of which went to shares listed in the PSE.

Investments in peso-denominated government securities and in money market instruments accounted for 20 percent and 1 percent, respectively.

On the other hand, capital repatriations totaled $557.1 million and were traced to withdrawals of investments in PSE-listed shares, 50 percent; government securities, 16 percent; and peso bank deposits, 34 percent.

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