Net ‘hot money’ inflow hits $38.21M in September

Net inflow of foreign portfolio investments hit $38.21 million in September, bringing the total hot money inflow for the first nine months of the year to $3.4 billion, a two-fold increase from $1.4 billion a year ago.

Out of the total inflows during the nine-month period, the BSP said investments in PSE-listed shares amounted to $10.1 billion, accounting for 83 percent of total and representing almost thrice the comparable amount in 2006.

The BSP reported that over 74 percent of investments in Philippine stocks were distributed among property, telecommunication, utility and holding firms. Peso-denominated government securities, primarily FXTNs, absorbed $1.9 billion (16 percent) of the total investment inflows while money market instruments and peso bank deposits had a combined share of just over one percent.

The September net inflows alone reversed the August outflow recorded by the BSP at $246.4 million as foreign investors dumped their Philippine holdings amid worries over the global fallout from the crisis in the US housing market.

By September, however, the market had already recovered from the August selloff and central bank officials said they expect even higher inflows in October as the market celebrated the reduction in the BSP’s overnight lending and borrowing rates.

The BSP said about 81 percent of total inflows in September went to shares listed in the Philippine Stock Exchange (PSE). 

The balance went to placements in peso-denominated government securities, primarily Fixed Rate Treasury Notes or FXTNs.

On the other hand, the BSP said total outflows reflected divestments from PSE-listed shares which accounted for 48 percent of outflows; divestments from government securities (16 percent); and withdrawals of money market placements and peso deposits,  (combined 36 percent share).

BSP Governor Amando M. Tetangco Jr said the factors that significantly influenced the return of foreign portfolio investments included the easing of inflation to 2.4 percent in August (from 2.6 percent in July), the cut in the US federal funds rate by a larger-than-expected 50 basis points, and the P13.9 billion government budget surplus in August.

“Investors also reacted positively to ADB’s upgrading of its growth forecast for the country,” he said.