$807.15M in net 'hot money' exits PHL in Sept., a near three-year record

Foreign portfolio investments in the country registered net outflows of $807.15 million in September, the highest in nearly three years, due to local and international concerns, the Bangko Sentral ng Pilipinas (BSP) said Thursday.

Data released by the central bank showed $807.15 million in net "hot money" outflows last month, a reversal from the $427.07 million in net inflows in August, even if it was better that the $324.98 million in net outflow in September 2015.

Foreign portfolio investments are also called hot money because of the ease by which the funds enter and leave markets.

The net outflow last month was the highest since the $1.8 billion of outflow posted in January 2014.

Outflows during the month registered at $2.080 billion, exceeding inflows of $1.273 billion.

In an emailed statement, the central bank attributed the situation to three factors that weighed on investor sentiment: the uncertainty about the Fed rate hike, the bombing in Davao City, and the European Central Bank's decision to discontinue its bond-buying program.

Market players were widely expecting the Federal Open Market Committee (FOMC) to raise interest rates when it meets on December 13 to 14. The Federal Reserve signaled strong hints it could tighten monetary policy by the end of the year.

The central bank was also referring to the Davao blasts on September 7, which killed 14 people and left more than 65 others injured.

While the same issues were cited by Cid Terosa, dean of the University of Asia and the Pacific (UA&P) School of Economics, he said the pronouncements of President Rodrigo R. Duterte have caused jitters among investors.

"The expectations of a possible rise in interest rates in the USA and tension-building statements of Pres. Du30 that have made many investors jittery are major factors for the outflow," he said in a text message.

Standard and Poor's (S&P) Global Ratings said in its September 2016 issue of Asia-Pacific Snapshots: "International investors may be getting worried about potential diplomatic complications and short-term law and order issues on the ground."

In the third quarter, hot money transactions posted overall net inflows of $687 million, up from $170 million in the second quarter and $410 million in the first quarter.

"This was mainly due to an initial public offering (IPO) by an industrial company as well as renewed interest in peso government securities," the central bank said.

The only IPO listing in the stock market – during the third quarter – was the P25.1-billion share sale of Cemex Holdings Philippines Inc.

Year-to-date, net inflows totaled $1.266 billion from $413.93 million in net outflows a year earlier. — VDS, GMA News