Net portfolio inflow up in January

MANILA, Philippines - Foreign portfolio investments surged to a 26-month high in January as investors swamped local financial markets on optimism about the economy, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Portfolio placements – also called “hot money” for the ease they enter and exit economies – posted a net inflow of $1.270 billion last month, more than double the $586.01 million posted in the same period last year.

It was also the strongest performance since the $1.663 billion net inflow recorded in November 2010. A net inflow indicates more investments entered the country than left.

Broken down, gross inflows totaled $2.810 billion, while gross outflows reached $1.539 billion.

In a statement, the central bank said “investors reacted positively” to the 6.6 percent growth posted by the Philippine economy in 2012. The “improved outlook” of the International Monetary Fund (IMF) also contributed to the increase.

The 6.6-percent expansion last year surpassed the government target range of five to six-percent and even the IMF’s revised projection of 6.5 percent. Originally, the multilateral agency has forecast growth of 4.8 percent last year.

For 2013, IMF likewise revised upwards its growth outlook to six percent from 4.8 percent. The latest figure met the low-end of the Aquino administration’s six to seven-percent target.

In addition, the BSP said its decision to keep policy rates low also boded well for more foreign investments. The stance of the Securities and Exchange Commission on computing foreign ownership based on common shares, not all shares, was also welcomed.

Of total portfolio inflows, 65.3 percent went to the local bourse, while the remaining 33.6 percent entered the bond market.

The two financial markets have posted record performances for the past month. The benchmark Philippine Stock Exchange (PSE) index has reached 16 record-highs this year, while Treasury bill yields have been below one percent for the past three auctions.

At the local bourse, the central bank said main beneficiaries of hot money were holding firms ($743 million), banks ($344 million), property companies ($235 million), telecommunication firms ($177 million) and utility companies ($125 million).

Top investor countries were Singapore, the US, the United Kingdom, Luxembourg and Hong Kong.

Hot money flows are part of the country’s balance of payments, which measures our capacity to settle trade obligation and meet other external requirements.