$159.2-M net inflow recorded in 1st 4 months

As the country’s rating improved from negative to stable, the net inflow of portfolio or short-term investment funds in the Philippines took a 180-degree swing, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

According to BSP Governor Rafael Buenaventura, renewed investor confidence resulted in a reversal of last year’s $20.9-million outflow from January to April, to a $159.2-million net inflow this year.

"I think investors are encouraged by our sound fundamentals as well as the success of our monetary policy," Buenaventura said.

Buenaventura expressed confidence that portfolio funds would continue to come particularly in view of rating firm Standard & Poor’s recent upgrading of its outlook on Philippine long-term credit to "stable," from "negative".

Buenaventura said the market reacted ahead of the outlook upgrade and investments started to flow back into the country even before the rating agencies announced their updated ratings.

Buenaventura also welcomed the decision $1of the California Public Employees Retirement System (CalPERS) to resume investing in Southeast Asia, specifically the Philippines. The fund previously decided to withdraw from the region due to its bleak economic outlook.

The Arroyo administration has been trying to woo CalPERS back into the country, saying the pension fund’s decision to pull out from the Philippines was based on inaccurate information.

Finance Secretary Jose Isidro Camacho met with senior CalPERS officials in the US to convince America’s largest pension fund to reconsider its decision.

According to Camacho, CalPERS’ decision was based on two considerations: the country factor and market factor. Although the country scored high on the fund’s country evaluation, it failed to meet three criteria under the market evaluation.

CalPERS has a $1-billion investment in emerging markets that included Southeast Asia, Latin America and Eastern Europe. After its evaluation, it announced that it was pulling out its investments in the Philippines, Indonesia, Malaysia and Thailand.

CalPERS had decided to shift its investments to Poland and Hungary.

In the Philippines, CalPERS had investments of up to $25 million, more than twice the total daily trade at the PSE. It is the largest holder of Philippine bonds and its pullout has had a dampening effect on the market.

CalPERS is the largest pension fund in the US with assets of over $150 billion.

Camacho said CalPERS evaluated the individual countries in the region based on overall market liquidity and volatility, settlement procedures and openness.

"It became apparent to me that their basis for the decision was inaccurate," Camacho said. "So I just discussed with them some information that they were not previously aware of."

According to Camacho, CalPERS had not even heard of the Philippine Central Depository (PCD) and its book entry system that allows scripless trading at the Philippine Stock Exchange.

"They thought our stock market was totally manual," Camacho said. "I also told them that we have an open market, there are no restrictions on repatriation and foreign investors can even buy indirectly into media concerns.