‘Hot money’ surged in April

Foreign “hot money” surged in April as the investment grade assigned on the country served to boost investors’ appetite for peso-denominated stocks and bonds.

The Bangko Sentral ng Pilipinas on Thursday reported that net inflow of foreign portfolio investments reached $1.13 billion in April, over three times the $333.43 million reported in the same month last year.

Also, cumulative net inflow in the first four months of the year amounted to $2.1 billion, nearly three times the $766.18 million registered in the same period last year.

The jump in foreign hot money came about after Fitch Ratings decided in March to upgrade the country’s credit rating from BB+ to the minimum investment grade of BBB-.

Apart from the investment grade, the BSP said, positive corporate earnings in the first quarter and the move of Standard & Poor’s to raise its growth forecast for the country likewise served to attract more foreign portfolio investments to the country.

S&P raised its 2013 gross domestic product (GDP) growth projection for the Philippines from 5.9 to 6.5 percent, citing rising public spending and private sector investments.

The new forecast is within the government’s official target of 6 to 7 percent. Last year, the economy grew by 6.6 percent.

The BSP said the inflows in April funded the purchase of publicly listed stocks and government securities. Some were also placed in time deposits.

The surge in foreign portfolio investments partly aided the sharp rise of the Philippine Stock Exchange Index (PSEi), which has been setting record highs since the start of the year.

The biggest sources of foreign portfolio inflows were the United States, Singapore, Hong Kong and Luxembourg.