Hot money flies out PHL in March

Speculative foreign funds flowed out of the Philippines in March after investors cashed in gains from the domestic equities market, the Bangko Sentral ng Pilipinas said. In a report Thursday, the Bangko Sentral said foreign portfolio investments—known as "hot money" given the ease with which they enter and exit an economy—registered a net outflow of $395 million last month, a turnaround from the $183 million net inflow in March of last year. Unlike foreign direct investments, hot money does not directly strengthen industries and create jobs. The March figure was due to foreigners' selling their holdings of Philippine shares and other financial instruments. While non-residents hiked their investments by 10 percent to $2.3 billion in March from $2.1 billion in February, withdrawals likewise increased to $2.7 billion from $1.9 billion over the same period. Money placed at the Philippine Stock Exchange (PSE), accounted for the bulk or 84 percent of portfolio inflows. Specifically, funds were parked in holding companies (with $510 million invested), property firms ($454 million), banks ($333 million), telecom companies ($185 million) and food manufacturers ($183 million). Some 15 percent of gross inflows were invested in peso-denominated government debt papers, while the balance was put into peso time deposits. Despite the net outflows in March, the Philippines still saw net inflows of hot money in the first quarter at $1.086 billion as foreigners withdrew only $6.176 billion of the $7.262 billion they parked in Philippine financial assets. The first-quarter net inflows compares to the $464 million in the same three-month period last year. Strong earnings of homegrown companies, relaxed foreign ownership rules from the Securities and Exchange Commission and the Philippines' upgrade to investment grade by Fitch likely fueled the net hot money inflow in the first quarter, the Bangko Sentral said. — Siegfrid O. Alegado/BM, GMA News