Hot money inflows surge in Jan-July

Despite the political issues hounding the Arroyo administration, inflows of foreign hot money hit $1.908 billion from January to July 15 this year, 13 times the inflows recorded in the same period last year.

Based on a report from the Bangko Sentral ng Pilipinas (BSP), actual inflows for the first two weeks of July, when the political noise was at its peak, amounted to $313.7 million, significantly higher than the $80.6 million recorded in the same period in 2004.

For the two-week period in July, outflows stood at $255.1 million, resulting in a net inflow of $58.6 million.

Based on BSP data, July’s net inflow of $58.6 million was a sharp turnaround from the net outflow of $0.1 million recorded in the same period last year.

Hot money refers to funds coming into the country in the form of investment in stocks, bonds, money market instruments on a short-term basis.

The net foreign portfolio investments were based on the data gathered from the country’s five largest custodian banks – ING Bank, Citibank, HSBC, Standard Chartered Bank and Deutsche Bank.

For the second week of July alone, hot money inflows stood at $115 million as against outflows of $85.8 million bringing the net inflow for the said period to $29.7 million.

BSP Governor Amando Tetangco Jr. attributed the improvement in foreign portfolio investment for the third week of July to an increase in investment in government securities, Philippine Stock Exchange (PSE)-listed companies and peso time deposits

Tetangco said of the new registered foreign portfolio inflow of $115 million during the second week of July, government securities accounted for $58.2 million; PSE listed companies got $55.9 million; and $1.4 million went to time deposit accounts.

Meanwhile, total portfolio investment for the period January to April amounted to $2.12 billion as against $678 million in the comparative period in 2004 or an improvement of 212.83 percent.

Direct foreign investment placements for the first four months of 2005 reached $441 million, an improvement of 85.29 percent from $238 million in the same period in 2004.

Outflows of direct foreign investment for the period under review reached $243 million bringing the net inflow to $198 million for the period Jan. to April 2005.

BSP deputy governor Diwa Guinigundo attributed the four-month improvement in direct foreign investment to the relatively good economic indicators and less political noise at that time.

"There was no political uncertainty then. We registered a 4.6 percent growth in economy for the first quarter this year and there were news that EVAT would likely be passed," Guinigundo said.

For the whole of 2005, the BSP earlier said total foreign porfolio investments could go up to as high of $4 billion, especially if the Arroyo administration could deliver its entire P80 billion tax reform package.