Hot money inflow hits $1.977B in Jan to Sept 9

Net foreign portfolio investments or hot money amounted to $1.977 billion from January to Sept. 9 this year, 12 times the $152.6- million net inflow recorded in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

However, because of renewed political and inflation concerns, a net outflow of $29.9 million was recorded for the week ending Sept. 9 this year.

The BSP said this was the first time that so-called hot money recorded an outflow from six consecutive weeks of net inflows.

Market analysts cited renewed political concerns, the slight acceleration in the inflation rate to 7.2 percent in August, and expectations of a hike in interest rates as factors that may contribute to the net divestment from portfolio investment instruments.

The registered foreign portfolio investments refer to placements made by non-residents in domestic financial instruments directly registered with the BSP or with custodian banks.

Such financial instruments include shares of stock acquired through the Philippine Stock Exchange (PSE) trading floor, peso-denominated government securities, peso time deposits in banks, and money market instruments issued by the local private sector. The non-resident 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 $60 million, of which 88.7 percent or $53.2 million were in PSE-listed securities and $6.8 million in Fixed Rate Treasury Notes (FXTNs).

These were exceeded by $89.8 million in capital repatriations/outflows from BSP-registered investments, $38.2 million from the sale of listed securities, $35 million from the sale of FXTNs and $16.6 million from withdrawals of peso deposits.

During the same period, the foreign portfolio investments that were registered by the BSP totaled $4.5 billion, 3.5 times the $1.29 billion figure for the comparable period in 2004.

PSE-listed securities and government securities (primarily FXTNs) accounted for 68.2 percent and 31.2 percent, respectively, of these new investments, with peso bank deposits and money market instruments comprising the 0.6 percent balance.

On the other hand, outflows/capital repatriations pertaining to registered foreign portfolio investments amounted to $2.5 billion, more than double the 2004 figure of $1.15 billion.