Foreign fund managers withdrew their investments from the domestic financial markets in February to take profit from previous gains in the stock market amid the possibility that the US Federal Reserve may increase interest rates again.
Data from the Bangko Sentral ng Pilipinas on Thursday showed that foreign portfolio investments or ‘hot money’ recorded a net outflow of $545 million last month, a reversal of the $162-million net inflow in January. It was also higher than the $409-million net outflow registered in February 2017.
The Bangko Sentral said in a statement the withdrawals could be attributed to “profit taking as well as investor reaction to news of possible rate increases by the US Federal Reserve due to an expected surge in inflation amidst implementation of the US government’s tax cuts.”
Total inflows in February reached $1.028 billion, up from $981 million a year ago, while gross outflows hit $1.573 billion, also higher than $1.39-billion outflows in the same period last year.
About 81 percent of investments in February were placed in securities listed in the Philippine Stock Exchange, pertaining mainly to holding firms, property companies, banks, food, beverage and tobacco firms and gaming companies. The 19-percent balance went to peso government securities.
The United Kingdom, the US, Malaysia, Hong Kong, Luxembourg and Singapore were the top six sources of foreign funds in February.
Julito G. Rada
Registration of inward foreign investments with the Bangko Sentral ng Pilipinas is optional under the liberalized rules on foreign exchange transactions. The issuance of a BSP registration document entitles the investor or his representative to buy foreign exchange from authorized agent banks and/or their subsidiary/affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment.
Hot money posted a net outflow of $205 million in 2017, as the gross withdrawals of $16.267 billion exceeded the gross inflows of $16.062 billion.
The Bangko Sentral expects hot money to post a net outflow of $900 million this year.