Net ‘hot money’ inflow surges 385% to $883.4 million in 1st 8 months

MANILA, Philippines – Net inflow of foreign portfolio investments surged by 385 percent in the first eight months of the year as more investors pumped in more money into the local government securities and equities markets in light of the stronger-than-expected economic rebound in the first half of the year, data released by the Bangko Sentral ng Pilipinas (BSP) over the weekend showed.

Preliminary figures revealed that foreign portfolio investments or “hot money” posted a net inflow of $883.4 million from January to August this year or about $701 million higher than the net inflow of $182.2 million registered in the same period last year.

BSP Governor Amando M. Tetangco Jr. attributed the increase to the steady rise in investments in shares of stocks listed at the Philippine Stock Exchange (PSE) and the continued increase in inflows from the business process outsourcing (BPO) sector as well as robust overseas Filipino remittances.

“This could be attributed to the good performance of the emerging markets including the Philippines. There are more funds coming in,” Tetangco stressed.

For one, the PSE index hit a new record level of 3,902.56 after surging by 97.78 points or 2.57 percent last Sept. 9 on the back of strong foreign buying and robust exports data.

Year to date, the PSE index grew by 849.88 points or 27.84 percent.

The BSP chief also cited the surprising gross domestic product (GDP) growth of 7.9 percent in the first half of the year from only 1.2 percent in the same period last year.

Data showed that foreign portfolio inflows increased by 41.7 percent to $5.703 billion from January to August this year compared with $4.024 billion in the same period last year.

Major sources of foreign portfolio investment inflows include the US, the United Kingdom, Singapore, Malaysia, and Luxembourg.

On the other hand, gross foreign portfolio investment outflows likewise went up by 25.4 percent to $4.82 billion in the first eight months of the year from $3.84 billion in the same period last year.

Monetary authorities attributed the steady flow of foreign portfolio investments into the country to the stable financial markets, robust corporate earnings, strong peso, the rise in US stock market as well as buoyant Asian markets as well as the strong economic rebound.

The Philippines shrugged off the global recession and posted a portfolio investments net inflow of $388.02 million in 2009, a complete reversal of the $1.784 billion outflow posted in 2008. Inflows amounted to $6.335 billion last year or 23.8 percent lower than the $8.321 billion inflows registered while outflows fell by 41 percent to $5.947 billion from $10.105 billion.

For this year, monetary authorities see foreign portfolio investments increasing more than seven folds this year despite the higher risk brought about by the debt crisis in Europe.

The BSP sees inflows of foreign portfolio investments or “hot money” hitting $2.9 billion this year or 747 percent higher than the $388.02 million registered in 2009.

Likewise, the BSP is set to revise its projected balance of payment (BOP) position this year due to strong foreign exchange inflows brought about by the steady increase in the amount of money sent home by overseas Filipino workers (OFWs).

The BOP, which refers to the difference of foreign exchange inflows and outflows on a particular period and represents the country’s transactions with the rest of the world, is projected to grow to $3.7 billion instead of only $3.2 billion this year. –Lawrence Agcaoili (The Philippine Star)