BANGKO Sentral ng Pilipinas expects portfolio investments, or “hot money,” to post a bigger net outflow of $1.3 billion in 2016 due to external headwinds and as the US economy shows signs of recovery, triggering capital flights from the country.
The net outflow target next year is significantly higher than the expected $200-million net outflow this year, which is actually a revision of the previous target of $1.4 billion for 2015.
Bangko Sentral reviews twice the hot money target, alongside other economic data such as foreign direct investments, balance of payments, remittances, among others.
“External headwinds emanating from the slowdown in the Chinese economy and the modest growth in Japan have affected the country’s external trade,” Bangko Sentral said in a report announcing the revision.
It also said expectations on the US Federal Reserve rate lift-off led to volatile capital flows. The Fed decided to increase interest rates on Dec. 17, 2015.
Foreign portfolio investments are overseas funds that are temporarily invested in local stocks, government securities and money market. These are also called “hot money” because of the ease they are invested in and taken out of the local markets.
Bangko Sentral said financial accounts had incurred net outflows in the third quarter which “emanated mainly from the reversal of portfolio investments to net outflows from net inflows in the third quarter of 2014.”
The portfolio investment account recorded net outflows of $3.2 billion in the third quarter, a reversal of the $885 million net inflows a year ago.
Latest data from Bangko Sentral showed that hot money in the first 11 months of 2015 posted a net outflow of $429 million, significantly lower than the $707-million net outflow a year ago.
Hot money registered a net outflow of $68.79 million in November, a reversal of the $369.9-million net inflow a year ago, as fund managers concerned with the impending interest rates hike in the United States pulled out their investments in the local markets.
Inflows fell 39.4 percent to $1.08 billion in November from $1.79 billion in the same month last year, while outflows declined by 19 percent to $1.15 billion from $1.42 billion.
Trading at the Philippine Stock Exchange and the Philippine Dealing & Exchange Corp. were suspended after Malacañang declared Nov. 18 and 19 as holidays as the country hosted the Asia Pacific Economic Cooperation Leaders’ Summit.
Bangko Sentral said 78 percent of investments registered in November were in in PSE-listed securities, primarily in holding firms, banks, property companies, food, beverage and tobacco firms, and utility companies.
However, investments in PSE-listed securities resulted in net outflows of $89 million in November.
The central bank said 21.5 percent went to peso-denominated government securities while the rest of the investments were in other peso debt instruments.
