Net ‘hot money’ inflow reaches $16.2M in week ending Sept 16

The Bangko Sentral ng Pilipinas (BSP) reported over the weekend that foreign portfolio investments or "hot money" remained strong in September due largely to improving macro-economic fundamentals.

BSP-registered foreign portfolio investments for the week ending Sept. 16 recorded a net inflow of $16.2 million, a sharp turnaround from the $29.8-million net outflow recorded the previous week.

BSP officer-in-charge Nestor Espenilla Jr. said favorable economic reports, including the increase in foreign direct equity investment during the first semester were the main factors for the continued increase in foreign portfolio investment.

Espenilla also attributed the increase to the surge in overseas Filipino workers (OFWs) remittances, the decrease in the country’s unemployment rate in July and expectations of more foreign investment resulting from President Arroyo’s trip to the US.

Foreign portfolio investments refer to placements made by non-residents in domestic financial instruments (e.g. shares of stock listed with the Philippine Stock Exchange (PSE), peso-denominated government securities, peso time deposits in banks, and money market instruments issued by the local private sector) directly registered with the BSP or with custodian banks.

These investments are funded with new inward remittances of foreign exchange converted into peso through banks operating in the Philippines. 

In contrast, BSP-registered direct equity investments refer to non-resident investments in firms/industries registered with BSP to allow such investors to source foreign exchange from the banking system for repatriation of dividends, profits and earnings from such investments.

On a gross basis, new inward portfolio investments registered with the BSP during the week totaled $52.9 million, of which 69.6 percent or $36.6 million were in PSE-listed securities and $16.1 million in Fixed Rate Treasury Notes (FXTNs).

Such investments exceeded capital repatriation/outflows from BSP-registered investments totaling $36.7 million, broken down as follows:  $26 million from the sale of listed securities, $7.3 million from withdrawals of peso deposits, and $3.4 million from the sale of FXTNs.

The year-to-date (Jan. to Sept. 16, 2005) net inflow from foreign portfolio investments amounted to $1.9 billion, nearly 12 times the $168.6 million figure for the same period last year and 4.1 times the $486.8 million total for the whole of 2004.

During the same period, foreign portfolio investments that were registered by the BSP totaled $4.55 billion, 3.3 times the $1.36 billion for the comparable period in 2004.