Hot money surges 71% to $838M in Q1

Net foreign portfolio investments or hot money surged by 71 percent to $838 million in the first three months of the year from $490 million in the same period last year, reflecting positive investor sentiment on the economy, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Gross investment inflows, which rose by 139 percent to $2.803 billion during the three-month period, went primarily into Philippine Stock Exchange (PSE)-listed shares with the property, telecommunication and banking sectors cornering the bulk, or $1.734 billion, of total.

Investments in peso-denominated government securities, mostly FXTNs, amounting to $606.13 million accounted for 17 percent, while investments in money market instruments amounting to $1.27 million and peso bank deposits of $104.07 million had a combined share of three percent.

These investments were funded by fresh inward remittances of foreign exchange converted into pesos through banks operating in the Philippines.

According to the BSP, more than half of these remittances came from the United Kingdom, the United States and Singapore.

Foreign investments in PSE-listed shares and government securities were 2.5 times and 1.8 times their corresponding levels in 2006, the BSP said.

Meanwhile, gross capital outflows grew by 174 percent from $977.94 million in 2006 because of divestments from listed shares of $1.183 billion (44 percent of total) and government securities of $774.34 million (29 percent); and withdrawals of money market placements and peso deposits totaling $718.36 million (27 percent). 

Profit-taking opportunities arising from the appreciation of the peso against the dollar were largely responsible for the increase in capital repatriations this year.    

For March alone, the net inflow from BSP-registered foreign portfolio investments amounted to $173.21 million.  The net weekly outflows in the first half of the month, which resulted in huge global equities sell-offs triggered by losses suffered by the China and US stock markets, were more than offset by the net weekly inflows in the second half.

Contributing to the positive investor sentiment and limiting the losses in the stock market after the sell-offs were positive reports on various areas of the economy.

According to the BSP, the nationwide nflation rate slowed to 2.6 percent in February while the budget deficit declined to P18.6 billion in the first two months of the year from P40.4 billion in the same period last year.

Gross inflows of registered foreign portfolio investments amounted to $1.254 billion in March, of which a large portion ($969.56 million) or 77 percent) consisted of shares listed in the PSE, mainly in property, telecommunication and transportation services companies and banks.