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BSP: Peso under threat as ‘hot money’ flows in

Devt’s in US may lead to surge in PH liquidity

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The Bangko Sentral ng Pilipinas said that the country could expect a surge in foreign portfolio investments because of the United States government’s plan to automatically cut public spending worth $85 billion.

The steep cuts in the budget of US government agencies, if not reversed by an agreement by the US executive and Congress, are widely expected to dampen the US economy. As a consequence, the Federal Reserve (the central bank of the United States) may be forced to pump more liquidity into the economy to cushion the adverse impact of the budget reductions.

Because of the US Fed’s stimulus initiatives, more money will circulate in the global economy, some of which will go to emerging markets like the Philippines, the BSP said. The liquidity could come in the form of foreign investments in peso-denominated stocks, bond, and other securities.

“The budget cuts are seen to simply increase the balance sheet of the US Fed. That means, liquidity overhand may even grow higher,” BSP Deputy Governor Diwa Guinigundo said over the weekend.

“The liquidity could spill over to emerging markets, including the Philippines.”

The BSP official cited reports saying that the US Congress and the White House failed to agree to amend the law requiring an automatic $85 billion worth of US Federal budget cuts to be implemented between March 2 and Oct. 1.

Guinigundo said the BSP would continue to monitor factors affecting stability of prices and financial markets in the Philippines.

Monetary officials are also ready to implement measures that will deter any disruption to the domestic economy, he said.

The BSP earlier reported that the gross inflow of foreign portfolio investments reached $2.8 billion in the first month of the year—over twice as much as the $1.2 billion registered in the same period of 2012.

Moreover, net inflow of foreign “hot money” (which is gross inflow less the outflow) hit $1.27 billion. It was also more than double the $586 million recorded a year ago.

The BSP said that the inflow of foreign capital is welcome. But it said that excessive amounts should be avoided or carefully managed to prevent any adverse impact on the financial markets and the economy in general.

A surge in foreign portfolio investments may trigger an appreciation of the peso. Exporters have complained that a strengthening peso makes Philippine-made goods more expensive in dollar terms, and thus become less competitive in the global market.

A steep and sudden rise in foreign portfolio investments likewise has the tendency to cause asset price inflation, which may lead to volatility in the financial markets.

In an earlier interview, Guinigundo said the BSP is mulling over plans to further relax the rules on foreign exchange outflows in response to projections of rising inflow of foreign portfolio investments.

In further relaxing the rules, an entity will find it easier to bring foreign currencies out of the Philippines, thereby offsetting the impact of any surge in inflows on the peso’s exchange rate.


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  • Ayjayar

    Finally… an official admission of “hot money” flowing in and triggering inflation. Hot moNey is just that… you really can’t get hold of it because it flies out of your hands faster than you can say, “take sabah claim to court!” :). just joking, but really, how do you prevent hot money from flying out? In other words, retain it for productive purposes, like the establishments of factories so that our jobless millions can have something to do? Simple but will take great courage: REQUIRE EACH OF THE 40 RICHEST FAMILIES IN THE PHILIPPINES TO PUT UP A BILLION PESO INDUSTRY AND HIRE 40,0000 WORKERS. I believe lt’s about time the rich do their part to help their less-fortunate brethren. This move will have a multiplier effect on the economy and hopefully we can become a truly-emerging economic tiger of Asia!.

  • Paul Vicente V Curimao

    @malek_abdul:disqus sir as as a point of advise, magkaiba po ang simpleng investor lang at ang day trader. yung tinutukoy mo ay leaning more sa day trader. kasi kung gusto mo lang maginvest, tama si ding at urhonor… aralin mo yung i-investan mo.. si ur honor nagbigay na ng so far ay safe na bet, which are BPI, BDO, GLO at PLDT.
    ngayon, kung gusto mo ng medyo risky, maghanap ka ng di pa masyado sikat na ok naman ang fundamentals. dito pumapasok yung suggestion ni ding na you should study about the PE, PB o NPV or dividend yields, working capital ratio, debt-equity ratio, etc. ng isang company bago ka maginvest.

    if you would go Ding’s route, once nakapili ka ng company to invest, gamitin mo yung ginagawa nila na kada kinsenas, or weekly, maglagay ka ng consistent number of money (take note, hindi shares ha) to invest. dito kasi gumagana yung tinatawag na averaging… so mas may chance ka na lesser ang losses mo pag-loss ang market at mas malaki ang gains mo pag-gain ang market.

    tapos, every quarter siguro mag-assess ka ng market para malaman mo kung gusto mo magBUY more or SELL. ang ganitong technique should be done with a long-term mentality. so far, sa market natin ngayon, may chance of 20% return in investment yearly. AGAIN, sabi ko so far ha. am not making promises here. dito, dapat aralin mo yung company mo at yung industry ng market mo… pero overall ngayon, OK ang market at ika nga nila, this is the time to invest.

    good luck sa whatever decision mo sir.

  • http://profile.yahoo.com/SPLUBLEOSERDBOIJTDOC6XIWGU mxsclxmxn

    In the P100 BILL series 2012 Serial # ZK188477 has a logo of the Grand Lodge of Free and Accepted Masons. Freemasonry has its goal of destroying Christendom and replacing it with man-centered government and Satanic religion filled with errors. 
     How can this logo of a satanic group be allowed to print in the monetary instrument of the country with the constitution believing in a God asking for HIS Divine Providence?

    • kevinmcn

      YOU REALLY BELIEVE THAT?

    • NoWorryBHappy

      Only rich people have the time to think about these nonsense.
      The ordinary Filipino has to break his back and earn an honest living with
      all the time he can get.

  • jmc49

    tama ka dyan MYHONOR its a good advice yan, kc maganda takbo ng stocks market. kaya sa mga OFW sana invest nila yong pera nila para atleast may savings in the future. hinde lage tag ulan kaya go go go.

  • UrHONOR

    TIME to strike the iron while it’s hot.  Magagaling na ang mga nagpapatakbo ng merkado ngayon.  Rinerendahan ang mga TNL na mga manipulador na karamihan ay mga Cheks.  CAL is a case in point.  Nahuli at nagawan ng paraan.  Pero noon, lalo na ng kapanahunan ni Erap da krrp at before him, ay dios apo, walang guistong pumasok sa merkado dahil halos lahat ng galaw ay manipulado.  Pero ngayon, iba na ang labanan.  Mas professional at ang dami-dami ng mga bagong issues na dahil sa kagalingan ng PSE board, parami-ng-parami ang nag i-IPO upang makasali ang publiko sa mga kita nila at ang pag-asenso ng kanilang mga kompanya.

    Marami akong kakilala na tumitiba ng husto ngayon sa merkado at maingat-na-maingat sa pagmamaneho ng proceeds ng kita nila.  Op kors, nothing in the mkt goes up in straight line.  And so long as the economy maintains its melodious hum, the companies will continue returning handsome profits and the price of their companies will remain strong and steady.

    Kung may na-itatabi kayong pondo na hindi naman ninyo kailangan kaagad, sa halip na patulugin ninyo sa CD o SDA, isabak ninyo sa merkado sa mga malalaking Co, tulad ng BAPI, BDO, GLO, at PLDT.  Kung gusto ninyong kaunting excitement, ilagany ninyo sa mga emerging companies tulad ng PG, EDC, at DNL.  Siguraduhin lamanh ninyo na pag-aralan ng mabuti ang papasukan ninyo dahil mahirap ang sumali sa hindi ninyo naiintindihan.

    • malek_abdul

      Its a good advice pero like me na OFW mahirap mag-invest sa stock market. Kailangan kasi medyo nakatutok ka sa galaw ng mga stocks otherwise you will lose the opportunity to sell your share of stocks pag biglang tumaas. Isa pa is the time zone difference. Philippine time is 5 hours ahead of Saudi.

    • http://profile.yahoo.com/6GH3DYTYT4W4N6SNUTXCXRQW2A DING

      Those would be investors, must now about P/E ratio E/P Ration Book value to P/E ratio etc….in addition to that you must have the abilitlity to scrutinize financial statements of a certain company. Like over leveraging company, highly liquid company etc..  If you don’t understand  all those things  forget about investing in stock market!! You may just imitating those gamblers in casino at sa sabungan!!

  • Weder-Weder Lang

    “The continuous inflow of hot money into our stock market is a sure sign of the world’s confidence in Daang Matuwid. A stronger Peso is a a sign of a stronger republic.” — President Aquino

    “Hot money chasing quick profits is a sure sign of speculators’ confidence in a bubble.” — Warren Buffett on CNBC interview with Maria Bartiromo

    “A surge in foreign portfolio . . .” — PDI (More like speculative portfolio).

  • http://profile.yahoo.com/AND7MQ5FERICDOIAUW56RYT45A tower_of_power

    Well, the TYPICAL CB OFFICIALS … ACTING LIKE FIREFIGHTERS!!!!! Kaya nakakapgduda … siguro deliberate itong ginagawa nila … talaga yatang the favorite course of action by cb to control the peso is to buy … kaya lumalaki ang losses nila … malamang malaki ang kinikita ng iba sa gawaing eto. Imagine buying peso from money changers and thge money changers selling the dollars back to CB …. WOW … NAPAKAGALENG NA RACKET!!!!

    BE PROACTIVE >>> PARA HINDI KAYO MAPAGDUDAHAN!!!!!!!!!!!!!!! AWARD WINNING PA NAMAN ANG IBA SA INYO DYAN!!!!!!

  • WeAry_Bat

    Very responsive of BSP.  They could tighten the rules back as soon as there is news of US resolving its’ debt cliff issues.

  • mamamiamia

    Oo naman ano!  safety of capital and everyone for themselves na ngayon ano.  more and more capital will flow sa Pinas especially ngayong uncertainty ng  economies ng  Western hemisphere (including na ang US)   Pinas  cannot escape this reality mga amiga.  Accept it! Specially now a days na high tech, just pindot ng button sa PC, pera mo outbound na in seconds to Shangri-La and to points unknown but only you only know…lol! Exciting!   Take advantage na lang but make sure you get the best of it and be wise mga hija! huwag magpaloko especially if someone is offering a rate of investments like the stars and the moon.  tonta ka if kumagat ka!  basta ok lang maging greedy but maging practical ka rin.  di ba practicality na and motto ngayon.! make use of your kukote  and not your emotions hija, so too sa field  ng pag-ibig.  remember,  everybody need something and they always need your “money”!  ..Be wise mga hija! Don’t let me say, “I told you so!    Ciao muna!



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