Net 'hot money' inflow hits $586 M in Jan

MANILA, Philippines - The net inflow of foreign portfolio investments or “hot money” into the country hit $586 million in January, a sharp 250.3 percent increase from the $167 million net inflow a year ago, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The figure was also four times the $140 million recorded in December 2011, according to a central bank statement.

Gross inflows amounted to $1.2 billion, lower than the year-ago level of $1.5 billion as investors remained cautious amid debt problems in Greece and a lower global economy growth outlook.

Investments in shares listed at the Philippine Stock Exchange (PSE) reached $776 million of which $202 million went into telecom providers, $189 million to holding firms, $152 million to utility companies, $148 million to banks, and $85 million to property developers.

 The United Kingdom, Singapore, US, Luxembourg and Hong Kong were the top five investor countries during the month.

On the other hand, outflows comprising of withdrawals from interim peso deposits declined 53.4 percent to $627.31 million from $1.344 billion. The US continued to be the main beneficiary of outflows from investments.

“Year-on-year registered investments and outflows were lower compared to last year as investors remained cautious due to the renewed worries over Greece’s debt problems, and the IMF’s cut in growth outlook,” Tetangco stressed.

About $385 million of the total net inflow went to PSE-listed shares, $199 million to government securities, $1 million to peso time deposits, and $200,000 to money market instruments.

 Last year, the net inflow of foreign portfolio investments retreated by 11.5 percent to $4.08 billion from $4.61 billion in 2010 due mainly to the net outflow of investments in PSE- listed shares amid the slowdown in the US and the debt crisis in Europe.

Monetary authorities believe that foreign capital would continue to flood emerging markets including the Philippines amid the global economic slowdown and the sovereign debt crisis in Europe.

Strong capital inflows, however, could stoke up inflation through excessive liquidity in the financial system.