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Capital flight rose to $516-million in June due to US rate hike

Registered foreign portfolio investments or “hot money” in June posted a net outflow of $516 million, more than twice the $206-million net outflow a month ago, pulled down mainly by the recent interest rate hike by the US Federal Reserve.

The Bangko Sentral ng Pilipinas said in a statement Thursday the other reasons for fund managers’ withdrawals of their investments in the domestic financial markets were their concerns on rising inflation, further depreciation of the peso and the trade war between the US and China.

The net outflow in June was also a turnaround from the $72.56-million net inflow in the same month last year. Gross inflow for the month reached $910.78 million, significantly down from $2.016 billion a year ago, while total outflow hit $1.426 billion, lower than $1.943 billion on the year.

“Outflows for the month of $1.4 billion closely reflected last month’s level of investors’ reaction to the continuing trade war between the US and China coupled with the sustained net foreign selling of PSE-listed securities since February this year,” the Bangko Sentral said.

The inflation rate in June further accelerated to a more than five-year high of 5.2 percent from 4.6 percent in May and surpassed the government forecast for the month, triggered mainly by faster increases in the prices of some food and beverage products.

The June inflation, based on the 2012 price index, was also significantly faster than 2.5 percent a year ago, bringing the average inflation rate in the first half to 4.3 percent, more than the upper limit of the target range of 2 percent to 4 percent for 2018.

The peso, meanwhile, ended the month of June at 53.34 per dollar. Its weakest this year was 53.515 on June 28. 

Despite the outflows, portfolio investments in the first half of the year remained in the positive territory with a net inflow of $306.25 million, a reversal of the $467.83-million net outflow in the first six months of last year.

The US, United Kingdom, Singapore, Hong Kong, and Switzerland were the top five investor countries for the month of June, with a combined share of 82.5 percent.

About 92 percent of investments during the month were in PSE-listed securities pertaining mainly to holding firms, property, banks, food, beverage and tobacco firms, and utility companies. The balance went to peso government securities.

Topics: foreign portfolio investments , hot money. US Federal Reserve , Bangko Sentral ng Pilipinas
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