Net hot money inflow hits $1.008 B in Nov

MANILA, Philippines - Foreign portfolio inflows surged to their highest level in two years in November as investors cheered good economic data last month, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Also called “hot money” for the ease they enter and exit economies, portfolio investments hit a net inflow of $1.008 billion last month, more than double the previous year’s $490.35 million.

This was also the highest recorded net inflow since the $1.663 billion recorded in November 2010. A net inflow indicates more investments entered local financial markets than left.

Foreign investors had “positive reaction” to the 7.1 percent growth posted in the third quarter amid a slow 3.2 percent inflation as of November, the central bank said. This drove them to the stock and bond markets which are the usual hot money destinations.

The latest figure brought the 11-month tally to $3.672 billion, slightly down from last year’s $3.938 billion. Nonetheless, the year-to-date number already surpassed the revised forecast of $3.2 billion announced last Thursday.

The new outlook was down from the $4.5 billion seen last June. For next year, portfolio net inflows are seen hitting $3.8 billion.

Broken down, 58.6 percent of registered investments were channeled to the Philippine Stock Exchange (PSE), while 41.4 percent went to the government securities.

At the PSE, main beneficiaries of hot money were banks ($346 million), holding firms ($313 million), property companies ($184 million), food, beverage and tobacco manufacturers ($87 million) and utility firms ($82 million).

The benchmark PSE index, which closed down 1.40 percent at 5,707.11 yesterday, has hit 36 record-highs this year, making it one of the world’s best performing bourses.

The bulk of inflows, the BSP said, came from the United Kingdom, the United States, Luxembourg, Singapore and Switzerland. The US remained the main destination for outflows, it added.

Hot money forms part of the country’s balance of payments (BOP), which measures our capacity to settle foreign obligations and meet external trade requirements.

BSP Deputy Governor Diwa Guinigundo said on Thursday that BOP surplus - which indicates the country has more than enough resources - is expected to hit $6.8 billion this year, before slowing down to $3 billion in 2013.