Net portfolio investments hit $2.1B in 2005

Foreign hot money flow increased four-fold in 2005, reaching $2.1 billion as foreign portfolio investors poured into the equities market, encouraged by improving fiscal conditions.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that gross transactions for the whole of 2005 reached a total of $5.5 billion, 2.5 times the $2.2 billion figure in 2004.

Outflows, on the other hand, amounted to $3.4 billion, twice the $1.7 billion total outflows recorded in 2004. This left a net inflow of $2.1 billion for the whole of 2005.

According to the BSP, shares of stock listed in the Philippine Stock Exchange (PSE) comprised 69.3 percent of registered foreign portfolio investments.

On the other hand, placements in peso-denominated government securities (primarily Fixed Rate Treasury Notes or FXTNs) made up 30.1 percent.

The BSP said peso time deposits in banks and money market instruments issued by the local private sector completed the remaining 0.6 percent.

"These investments were funded with new inward remittances of foreign exchange converted into pesos through banks operating in the Philippines," the BSP said.

On a month-on-month basis, however, the BSP reported a net outflow in portfolio investments – the first and only time that an outflow was recorded last year.

According to BSP data, portfolio transactions in December resulted in a cumulative net outflow of $4.9 million, the only monthly outflow figure during the year.

"That was partly because some investors decided to cash in on profits in the previous two weeks following the increase in the prices of a number of major stocks and the appreciation of the peso," the BSP said.

In December, the BSP said new inward portfolio investments registered with the Bangko Sentral totaled $255.2 million, of which $210.3 million or 82 percent were in PSE-listed securities.

On the other hand, capital repatriations/outflows pertaining to BSP-registered investments amounted to $260.1 million and were traced to divestments in PSE-listed securities.

Investors sold their PSE-listed stocks to the extent of $152.4 million which accounted for

59 percent of total outflows. On the other hand, withdrawals of peso deposits amounted to $60.7 million, 23 percent of total outflows.

The BSP also reported some $47 million worth of outflows due to the divestment of government securities. This accounted for 18 percent of total outflows.

Peso deposits withdrawn for outward remittance mainly represent proceeds of earlier divestments from PSE-listed shares and government securities, the BSP said.