Blame the euro crisis? Hot money drops 68% in May

MANILA, Philippines – While the euro crisis has been touted as an opportunity for emerging economies like the Philippines to benefit from investments’ eastward tilt, data on foreign portfolio investments in May showed otherwise.

Hot money–or funds that move very quickly in and out of the stocks, government securities and peso-denominated asset markets–reached only a net of $106 million in May, lower than the $333 million recorded a month ago and the $364.18 million a year ago.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo cited the uncertainties in the euro zone for the continuing jitters among investors.

“The talk about the possible exits of Greece from the Euro became louder for the most part of May. There is the possibility of spill over effects or contagion, which could be very serious,” Guinigundo explained in a statement on Friday, June 15.

Total inflows amounted to $1.524 billion while outflows stood at $1.418 billion.

“Outflows…rose to $1.4 billion or by 23.9% from last month’s level due to growing concerns from last month’s level due to growing concerns about Greece and Spain,” the BSP said.

Hot money is one of the indicators of investor confidence in an economy.

Inflows and outflows

BSP’s latest data showed that

• registered investments were almost at the same level compared as April at $1.5 billion.
• funds that went to peso-denominated government securities had a net inflow of $87 million
• funds that went into shares listed in the stock market had a net inflow of $69 million
• money market instruments resulted in net outflows of $49 million

Foreign funds also participated in the following initial public offerings (IPO):

• Bloomberry Resorts Corp.
• Rockwell Land Corp.
• East West Banking Corp.
• Calata Corp

The main beneficiaries of investments in PSE-listed shares were

• holding firms, garnering $337 million in investments
• diversified industrial sector with $228 million
• banks with $183 million
• property companies with $138 million
• telecommunications companies with $109 million

Most of the investment inflows originated from: United States, United Kingdom, Singapore, Hong Kong and Luxembourg.

Most of the fund outflows benefited the United States.

Nonetheless, monetary authorities believe that foreign capital would continue to flood emerging markets such as the Philippines because of the economic slowdown in the Europe.

Monetary officials closely watch the flow of foreign capital since it could feed inflationthrough excessive liquidity in the financial system. – Rappler.com