'Hot money' inflow hits $158 M in March

MANILA, Philippines - “Hot money” or foreign investments in stocks, government securities and peso-denominated assets yielded a net inflow of $158 million in March, a marked turnaround from the $305 million net outflow in February but lower than the $245 million net inflow recorded a year ago, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Funds went to peso-denominated government securities and shares listed in the stock market, with net foreign exchange inflows of $189 million and $100 million, respectively.

On the other hand, money market instruments resulted in net outflows of $141 million.

According to the BSP, registered investments for the month amounted to $1.3 billion in March, slightly decelerating from the $1.5 billion in February, mainly because of profit-taking on the part of investors.

Similarly, outflows declined to $1.2 billion in March from the $1.8 billion recorded in February, data also showed.

The main beneficiaries of investments in PSE-listed shares were holding firms, garnering $260 million in investments; banks with $171 million; property companies with $141 million; utility firms with $124 million and telecommunications companies with $120 million.

Investors came from the United States, United Kingdom, Singapore, Hong Kong and Luxembourg. The United States continued to be the main beneficiary of outflows from these investments.

Hot money is one of the indicators of investor confidence in an economy but they move very quickly in and out of the markets which is why they are called hot money.

Monetary authorities believe that foreign capital would continue to flood emerging markets such as the Philippines because of the economic slowdown in the Europe.

However, strong capital inflows can be speculative and feed inflation through excessive liquidity in the financial system.

During its rate-setting policy meeting on Thursday, the BSP kept the overnight borrowing rate back to a record low of four percent and the overnight lending rate to six percent due to the benign inflation outlook and after two rate cuts in January and March.