Foreign funds invested in shares of stock of local listed firms and in other Philippine financial assets dropped sharply last month amid a selloff in emerging markets.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that foreign portfolio investments -- also called "hot money" because of their flighty nature -- fell 60 percent to $999 million in August from $2.5 billion the month before. Inflows also slipped 20 percent from $1.3 billion in August of last year.
Outflows also accelerated from $868 million last year to $1.4 billion this year, thus last year's net inflows of $387 million reversed to net outflows of $442 million last month. This narrowed the year-to-date net inflows from $2.2 billion last year to $2 billion this year.
The BSP blamed the net outflow on the shortened trading brought about by bad weather, and on the traditional unwinding of stock market positions during the "ghost month" of August, an inauspicious time to invest for those who believe in luck. Eight out of every nine dollars of portfolio inflows were invested in Philippine stocks.
Also responsible for the outflow was the US Federal Reserve's hints that it may unwind its economic stimulus this month, the BSP said. Nearly eight out of every 10 dollars that pulled out of the Philippines went back to the US.
Foreign funds have been scaling back their exposure to emerging markets like the Philippines amid signs that the US economy is on the mend, a trigger for the Fed's decision to remove its economic stimulus. The Fed's monthly $85-billion bond-buying -- the third tranche of what has come to be called "quantitative easing" (QE) -- has been responsible for equity rallies around the world.
As a resut of the foreign fund pullout, the Philippine Stock Exchange index has trimmed its gains from a record high of more than 20 percent to seven percent in recent sessions.
source: interaksyon.com