Net hot money inflow down 66%

MANILA, Philippines - Net foreign portfolio inflow – or “hot money” for the ease with which they enter and exit economies – was down by 66 percent as of the third week of June from year-ago levels as risk aversion continued, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Hot money – placed in investments such as bonds and stocks – posted a net inflow of $824.08 million as of June 18-22, a sharp decline from the $2.418 billion recorded a year ago.

Gross inflows amounted to $381.48 million, while gross outflows reached $356.36 million.

For the period covering June 18-22, figures showed a net inflow of $25.12 million, reversing net outflows recorded in the previous two weeks.

“The slowdown was due to renewed risk aversion right before and after the

Greek elections,” BSP Deputy Governor Diwa Guinigundo said in a text message.

 A second round of elections was held in Greece last June 7 after parties opposed and in favor of the terms of the 130-billion-euro bailout failed to form a coalition government. Uncertainty to the polls’ outcome caused tensions in world financial markets worried that Greece would not honor its commitments and eventually got to leave the eurozone.

Pro-bailout New Democracy party was later on proclaimed the winner, claiming majority seats in the parliament and forming a coalition government with two other parties, socialist Pasok and the Democratic Left.

Guinigundo said “risk appetite seems to be on the upswing again” noting recent highs hit by the local bourse.

The Philippine Stock Exchange index (PSEi) closed at a record-high of 5,369.98 last July 5. The index has reached 22 record-highs this year, surpassing one after the other.

BSP last month revised its 2012 outlook for hot money net inflows to $4.5 billion from $5.7 billion due to continued risks posed by the eurozone crisis. Net foreign portfolio inflow totaled $4.077 billion in 2011.