Net ‘hot’ money inflow up by 170% in Sept.

Foreign fund owners purchased more peso-denominated stocks and bonds in September as the net inflow of foreign portfolio investments to the Philippines nearly tripled, according to the Bangko Sentral ng Pilipinas.

The net inflow of foreign portfolio investments to the Philippines nearly tripled in September after global investors’ appetite rose for securities from emerging markets.

The Bangko Sentral ng Pilipinas (BSP) on Thursday reported that the net inflow of “hot” money reached $407.42 million in September, up by 171 percent from the $150.05 million registered in the same month last year.

According to the BSP, foreign fund owners purchased more peso-denominated stocks and bonds in September following the announcement by the European Central Bank that it would buy more eurozone bonds to address the crisis in the Western region.

The rise in purchases of peso-denominated securities likewise followed the announcement by Spain that it would implement budget cuts to help resolve its sovereign debt crisis, the BSP said.

Moreover, the announcement by the US Federal Reserve to implement a third round of “quantitative easing” (injection of liquidity) to boost growth of the US economy likewise lifted appetite for portfolio assets from the Philippines and other emerging Asian countries, the BSP said.

September’s figure brought the total net inflow of foreign portfolio investments to $2.63 billion in the first nine months of the year—down by 18 percent from the $3.21 billion reported in the same period a year ago.

Officials said the year-on-year drop in the net inflow was due to concerns over the prolonged debt crisis in the eurozone and the lackluster performance of the US economy.

Data from the BSP further showed that stock purchases in the Philippine Stock Exchange accounted for about $146 million of the net inflow of foreign hot money in September alone. Another $180 million was accounted for by purchases of government securities. The balance was invested in money market instruments and time deposits.

Those that benefited most from equity investments by foreigners were food manufacturing, holding firms, banks, property firms and telecommunications companies, the BSP said.

Given the move of the US Fed to inject more funds to the US economy, analysts said foreign portfolio investments in emerging markets like the Philippines would probably increase in the months ahead. This is because some of the funds to be injected by the US Fed could be used by beneficiaries to purchase emerging-market assets.

The BSP said that it welcomes the increase in foreign investments to the Philippines, but said it is prepared to intervene more in the foreign exchange market if such investments were to become excessive, causing the exchange rate to turn volatile.