Net ‘hot money’ inflow jumps 153%

Manila, Philippines – The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the net inflow of foreign portfolio investments or “hot money” surged 153 percent in the first quarter of the year despite a sharp decline in inflows in March due to the devastating earthquake and tsunami in Japan.

BSP Governor Amando M. Tetangco Jr. said in a statement that the net inflow of foreign portfolio investments or “hot money” amounted to $972.56 million in the first three months of the year or $587.8 million higher than the $384.75 million recorded in the same period last year.

Tetangco pointed out that inflows jumped 175 percent to $4.56 billion during the first three months of the year from $1.66 billion a year ago due to a surge in investments in shares listed at the Philippine Stock Exchange (PSE).

He added that investments in PSE-listed shares rose 65.9 percent to $2.1 billion in the first three months of the year from $1.3 billion in the same period last year.

Of the total amount, Tetangco said about $535 million went to holding firms, $436 million went to banks, $330 million to utility companies, $284 million to telecommunication firms, and $272 million went to property developers.

Data showed that Singapore, the US, United Kingdom, Luxembourg, and Hong Kong accounted for 89.6 percent of the total foreign portfolio investments or hot money during the review period.

On the other hand, Tetangco said outflows consisting mostly of withdrawals from interim peso deposits surged 182 percent to $3.58 billion from January to March compared to $1.27 billion in the same period in 2010.

For March alone, the net inflow of foreign portfolio investments rose 222.7 percent to $245.4 million from $76.04 million in the same month last year. Inflows jumped 168 percent to $1.55 billion from $579.7 million while withdrawals surged 159 percent to $1.3 billion from $503.7 million.

However, Tetangco said the net inflow of foreign portfolio investments in March was 54 percent lower than the $534.1 million net inflow registered in February mainly due to the impact of the disaster in Japan last March 11.

“Compared to February 2011, however, net inflows for March were 54 percent lower than the $534 million recorded in February due to the devastating earthquake and tsunami that hit northeastern Japan,” Tetangco said.

He explained that investments in PSE-listed shares grew 62 percent to $779 million in March from $481 million in the same month last year while investments in fixed income peso government securities jumped 675 percent to $767 million from $99 million.

“Jitters about the continuing protests and violence in Middle East and North African redirected funds to peso government securities which offered comparatively higher yields on a regional basis,” Tetangco said. -Lawrence Agcaoili (The Philippine Star)