Hot money registers record outflow in May

Foreign portfolio investments in May registered its highest monthly outflow on record as investors gave risky assets like peso denominated ones in favor of safe haven US investments.

Data from the Bangko Sentral ng Pilipinas (BSP) show portfolio flows – also known as “hot money” given the ease with which they enter and exit economies –  registered a net outflow of $640.84 million in May, reversing April's $1.13 billion inflow.

"Outflows rose to $2.6 billion from $2.4 billion last month due to announcement of a possible scaling down of quantitative easing in the US," the central bank said in a statement.

Outflows last month were partially offset by $2.007 billion inflows to select securities.

This was due to higher than expected corporate earnings in the first quarter and optimism over the successful national and local elections in May, the BSP said.

Bulk of these investments or $1.8 billion were in equities listed in the Philippine Stock Exchange (PSE), mainly in holding firms ($664 million), banks ($297 million), property developers ($205 million), transport companies ($136 million) and food, beverage and tobacco firms ($135 million).

However, most investors turned to safe-haven US assets on speculations that the Federal Reserve will unwind its $85-billion bond-buying stimulus, dubbed quantitative easing.

The shift in preference saw emerging equities markets declining from records in the past weeks.

The last hot money data pulled the year-to-date tally to a net inflow of $1.577 billion, still 74.34 percent more than the $904.6 million posted in the same period in 2011.

The net inflow of hot money is expected to hit $3 billion this year.  — KBK, GMA News