Portfolio investments seen to triple this yr

The Bangko Sentral ng Pilipinas (BSP) said over the weekend that portfolio investments can easily triple this year, especially if the Arroyo administration delivers its promised reforms beginning with the final adjustment in power rates.

The BSP receives regular reports from commercial banks detailing the inflow and outflow of foreign portfolio investments.

Based on this data, net portfolio inflows during the first three weeks of the year alone already surpassed the volume recorded for the whole of 2004.

BSP Governor Rafael B. Buenaventura said that this was an indication that the recent improvements in debt and fiscal management had changed global perception enough to trigger the inflow of foreign portfolio investments.

"We are right now enjoying some modicum of credibility as investors wait for further reforms," Buenaventura said. "We have to tread carefully not to lose this credibility and in fact build on it."

Being removed from the blacklist of the Financial Action Task Force (FATF), according to Buenaventura, vastly improved the country’s prospects in the domestic capital market on top of positive indicators that were already triggering some degree of optimism among foreign investors.

Buenaventura said the market was upbeat over the San Miguel Corp.’ Kirin deal which he said demonstrated optimism and confidence in the country’s economic prospects even under the heavy weight of debt and fiscal woes.

"Then the government was able to borrow on a 25-year term," Buenaventura said. "If the NG meets its reform commitments, their ability to borrow in the second half is assured and if there is sufficient inflows they might not even have to borrow in foreign currency."

According to Buenaventura, current inflow levels were durable but only if the NG does not ruin its own momentum. "It can be more durable and sustainable if we do all these things we have to do. All these good things are really up to us."

Buenaventura said the stockmarket was showing signs of life that investors were watching carefully such as Semirara Mines’ prospects and the developments in the mining sector as a while.

"If won’t happen overnight but these are possibilities that were not present before," Buenaventura said.

Even if the country was downgraded by Moody’s Investors Inc, Buenaventura said it would only be for lack of track record. "It is possible for them to change the outlook, which puts us on an upward trajectory and market will expect upgrade in the future," he said. "Ultimately, prices will reflect that."

The BSP earlier reported a surge in net foreign portfolio investments in the last three weeks, booking cumulative net foreign exchange inflow of $427.2 million compared to the measly $12.9 million recorded over the same period last year.

In just three weeks, the BSP said net foreign portfolio inflows nearly topped the whole-year figure in 2004 of $486.8 million, indicating a serious renewal in investor interest despite the downgrade in the country’s credit rating.

"This represents a very strong opening for the year, particularly compared to the amount that came in last year," said Buenaventura.

The data were contained in a new report based on direct applications to the BSP for registration of foreign portfolio investments and daily reports on registered foreign portfolio investment transactions submitted by banks under the computerized Foreign Portfolio Investment Monitoring System of the BSP.