Net ‘hot money’ inflow surged to $212M in Feb.

Foreign portfolio investments to the Philippines swung to a net inflow in February as favorable sentiment on the economy led to an increase in the demand for peso-denominated stocks and bonds.

The significant appetite for local securities was reflected in the Philippine Stock Exchange Index, which posted new record highs during the month, and the low interest rates on government securities.

Net inflow of foreign “hot money” reached $211.65 million in February, a reversal from the net outflow of $305.30 million in the same month last year, the Bangko Sentral ng Pilipinas reported Friday.

Gross inflow amounted to $2.12 billion, while outflows settled at $1.91 billion.

The year-on-year increase in the inflow of foreign funds was consistent with projections that demand for emerging-market assets will remain robust this year as industrialized countries continue to face serious economic problems.

The inflow in February, however, was a significant drop from January levels.

“Registered portfolio investments in February were lower than in January due to market correction and profit-taking amid encouraging news on corporate earnings,” the BSP said in a statement.

Net inflow of foreign hot money in February represented an 83-percent drop from $1.27 billion in January. Gross inflow fell month-on-month by 24 percent from $2.81 billion.

The BSP expects foreign portfolio investments to remain robust throughout the year on the back of favorable forecasts on the Philippine economy.

Monetary officials said portfolio inflows were expected to pose liquidity-management challenges to the central bank. While the entry of hot money is welcome, they said excessive amounts cause problems for the economy.