Hot money fled PH in first three weeks of 2016

Foreign funds fled the domestic financial markets in the first three weeks of January, following the interest rate hike of the US Federal Reserve in December.

Data from Bangko Sentral ng Pilipinas showed foreign portfolio investments or ‘hot money’ registered a net outflow of $79.95 million in three weeks ending Jan. 22, a reversal of the $283-million net inflow a year ago. 

Gross outflows reached $622.6 million, exceeding gross inflows of $542.6 million in the three-week period.

Foreign portfolio investments are overseas funds that are temporarily invested in 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.

Hot money posted a net outflow of $599.69 million in 2015, missing the revised target of $200-million net outflow for the year.

This was almost twice the $310-million net outflow a year ago, triggered by investors’ anticipation of interest rate hike in the United States and slowdown in China’s economy.

The US Federal Reserve decided to increase interest rates on Dec. 17, 2015.

Gross inflows in 2015 reached $19.926 billion, while outflows hit $20.525 billion.

Bangko Sentral expects hot money to post a bigger net outflow of $1.3 billion in 2016 due to external headwinds.

“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.

Topics: Foreign funds , domestic financial markets , US Federal Reserve , Bangko Sentral ng Pilipinas , BSP
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