'Hot money' inflow surges in February

MANILA, Philippines - Foreign portfolio investments surged in the first two weeks of February after slowing down in January as investors started to take profits during the height of the tensions in Egypt, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend.

Latest data from the central bank showed that the net inflow of foreign portfolio investments or “hot money” surged 176 percent to $650.06 million as of Feb. 11 from $235.4 million in the same period last year.

Data showed that inflows of foreign portfolio investments or hot money almost tripled to $2.41 billion as of Feb. 11 from only $836.8 million in the same period last year.

These investments usually invested in shares listed at the Philippine Stock Exchange (PSE) are called hot money because they could be taken out of the country as quickly as they come in.

On the other hand, outflows consisting mainly of withdrawals from interim peso deposits representing divestment proceeds from registered investments that were parked in accounts pending reinvestment or repatriation almost tripled to $1.76 billion from $601.5 million.

Egypt President Hosni Mubarak stepped down last Feb. 11 after weeks of protests in Cairo but similar protests erupted in Bahrain, Yemen, Libya, and other countries seeking changes in government leaders.

The growth in foreign portfolio investments flowing into the Philippines slowed down to 13.5 percent in January from 54.9 percent in December due to profit taking and to the tensions in Egypt starting in late January

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.

Hot money that flowed into PSE-listed shares 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.

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

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.

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.

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.