MANILA, Philippines—The Philippines can expect a continued rise in the inflow of foreign portfolio investments this year, with the sudden shift in market appetite to dollar-denominated assets last week not seen to last long, the Bangko Sentral ng Pilipinas said.
The BSP believes that the Philippines remains poised to get more foreign portfolio investments this year compared to last year given its favorable economic fundamentals and the recent upgrades it got from global credit ratings agencies.
The net inflow of foreign portfolio investments last year hit $3.88B, down by 5 percent from $4.1 billion in 2011.
The BSP takes the view that the sudden fall of the peso to the 42-to-a-dollar territory and the drop to below 7,000 of the Philippine Stock Exchange Index last week were not enough reasons to worry about capital flight.
The movements of the peso against the greenback and the stock index last week were attributed to speculations that the US economy was headed for a more solid recovery this year.
Due to the sudden surge in appetite for dollar-denominated assets, the peso fell from the 41 to 42.26:$1 on Friday.
Tetangco said the recent assignment of investment ratings to the Philippines could pave the way for more substantial flows of portfolio investments.
Foreign portfolio investments are welcome, Tetangco said. He, however, admitted these could also result in faster inflation and exchange rate volatility if not properly managed.
On March 27, Fitch Ratings upgraded its rating for the Philippines by a notch from BB+ to BBB-, the minimum investment grade.
On May 2, Standard and Poor’s did the same.
The rating agencies cited the country’s robust growth, declining debt burden of the government, benign inflation and rising foreign exchange reserves for the upgrade.