Net ‘hot money’ inflow up 164% in January-July

LEGAZPI CITY, Philippines – The Bangko Sentral ng Pilipinas (BSP) announced yesterday that net inflow of foreign portfolio investments surged 164 percent in the first seven months of the year as investors pumped in more money into the local government securities and equities markets.

BSP Governor Amando M. Tetangco Jr. said foreign portfolio investments or “hot money” posted a net inflow of $701 million from January to July this year or $436 million higher than the net inflow of $265 million registered in the same period last year.

Tetangco pointed out that inflows went up by 37 percent to $5 billion in the first seven months of the year from $3.6 billion in the same period last year.

He attributed the increase to a 24 percent increase in investments in shares of stocks listed in the Philippine Stock Exchange (PSE) to $3.4 billion from $2.8 billion.

Major beneficiaries of the investments, he said, include banks with 22 percent, property companies with 20 percent, telecommunications providers with 19 percent, holding firms with 17 percent, and utility companies with 12 percent. About 84 percent of the total inflows came from the US, the United Kingdom, Singapore, Malaysia, and Luxembourg.

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 the US stock market as well as bouyant Asian markets as well as the stronger-than-expected gross domestic product growth of 7.3 percent in the first quarter of the year.

On the other hand, gross foreign portfolio investment outflows surged 26.5 percent to $4.3 billion from January to July from $3.4 billion in the same period last year.

For the month of July alone, Tetangco said foreign portfolio investments posted a net inflow of $14 million or 78 percent lower than the inflow of $66 million in the same month last year. The inflow was a complete reversal of the $86 million net outflow registered in June.

“This improvement during the month was due to positive developments on the domestic front including lower inflation rate, a stable peso and a more positive outlook with the assumption of the new administration,” the BSP chief stressed.

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. –Lawrence Agcaoili (The Philippine Star)