'Hot money' inflow growth slows to 13.5% in January

MANILA, Philippines - The growth of foreign portfolio investments or “hot money” inflow eased to 13.5 percent in January from 54.9 percent in December as investors took profits during the height of the tensions in Egypt, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando M. Tetangco Jr. attributed the slower growth in net inflows to massive selloffs experienced in January as the tensions in Egypt heightened during the review period.

“The decline seen in January 2011 may be attributed to profit taking and to the tensions in Egypt starting in late January which trigerred selloffs,” Tetangco stressed referring to massive protests in Cairo as pressures mounted for Egypt President Hosni Mubarak to step down.

Data showed that foreign portfolio investments posted a net inflow of $193.09 million in January or $22.96 million higher than the net inflow of $170.13 million booked in January last year.

Inflows surged 166.8 percent to $1.537 billion in January from $576.05 million in the same month last year while outflows jumped at a faster rate of 223.7 percent to $1.344 billion from $405.92 million.

Tetangco pointed out that hot money that flowed into shares listed at the Philippine Stock Exchange (PSE) grew by 41.3 percent to $616 million in January from $436 million in the same month last year, accounting for about 40.1 percent of the total foreign portfolio investments that flowed into the country last month.

He added that 59.9 percent or $921 million went to peso government securities with $870 million and peso time deposits with $50 million.

The BSP chief pointed out that about 90 percent of the total inflows came from the US, Singapore, Luxemburg, the United Kingdom, and Hong Kong.

He traced he outflows to the withdrawals from interim peso deposits representing divestment proceeds from registered investments that were parked in accounts pending reinvestment or repatriation.

The inflow of foreign portfolio investments hit a new record level of $4.61 billion last year or nearly 12 times the $388.02 million in 2009 as funds continued to flood emerging markets including the Philippines due to the fragile growth in advanced economies led by the US and Europe.

The amount of foreign portfolio investments registered surpassed the full year target of $2.9-billion set by monetary authorities for 2010. These investments are also called ‘hot money’ because they could be taken out of the country as quickly as they come in.

Statistics showed that inflows more than doubled to $12.997 billion last year from $6.335 billion in 2009 as investments in PSE-listed shares surged by 75 percent to $8.5 billion from $4.8 billion. The stock market cornered 65.2 percent of the total net inflows of foreign portfolio investments.

Major beneficiaries of hot money last year include banks with $1.7 billion followed by property companies with $1.6 billion, holding firms with $1.5 billion, telecommunication companies with $1.3 billion, and utility firms with $930 million while major sources were the US, Singapore, United Kingdom, Luxembourg, and Hong Kong.

On the other hand, outflows jumped 41 percent to $8.386 billion last year from a year-ago level of $5.947 billion. Outflows comprised mainly of withdrawals from interim peso deposits where funds are parked pending repatriation or reinvestment.