Hot money flowing back to RP – BSP official

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) expects hot money flows or investments in foreign stocks, government securities and peso-denominated assets to continue pouring into the Philippines on the back of improving investor confidence.

BSP Deputy Governor Diwa Guinigundo said risk aversion on the part of investors has tapered off because of improving global economic conditions.

“Financial markets have stabilized and risk appetite has increased. Investors are willing to go to emerging economies and the Philippines, given its sound macro fundamentals will naturally attract capital flows,” Guinigundo said.

Latest data from the BSP showed that foreign portfolio investments improved to a net inflow of $65.87 million in July or better than the previous month’s net inflow of $77 million.

Hot money recorded in July were also better than the net inflow of $7.38 million recorded in the same month last year, data from the BSP also showed.

The July foreign portfolio investments brought the year-to-date figure to a net inflow of $265 million which the central bank described as a marked improvement from the $577-million net outflow recorded in the same period last year.

The BSP attributed the rosy figures to improving investor confidence, brought about by positive reports on the country’s credit rating.

Last July, Moody’s Investors Service has raised its sovereign rating for the Philippines to Ba3 from B1 previously, noting the country’s high degree of resiliency against external shocks. A Ba3 rating is three notches below investment grade while a B1 rating is four notches below investment grade. The outlook on the ratings is positive.

“Investor confidence was boosted by positive reports of the country’s credit rating. Global consumer confidence rose following the previous quarter’s perception that the recession has bottomed out, and as consumers started to embrace the idea of a recovery,” the BSP has said.

Guinigundo said that these developments indicate that investors would again be parking their funds in emerging markets like the Philippines. –Iris C. Gonzales (The Philippine Star)