October ‘hot money’ inflows surge

Investments in local shares, bonds, and government securities surged in October amid the renewed optimism of international fund managers on emerging markets, data from the central bank showed.

The Bangko Sentral ng Pilipinas (BSP) in a statement on Thursday said hot money investments were at a net inflow of $969 million in October, the highest since the $1.13 billion that came in last April.

The net inflow for the month was also 41.87 percent higher from the level last September and the $40.1 million in October of 2012. This brought the year-to-date total to $3.66 billion, better than the $2.69 billion last year.

Foreign portfolio investments are referred to as “hot money” due to the speed at which these can enter and leave local financial markets. Unlike foreign direct investments, which are used to finance the operations of local businesses—and are therefore more long-term in nature—foreign investors can divest from the local stock and bond markets at a moment’s notice.

The BSP attributed the surge of money into the country to the third investment-grade rating that the government received in October and the continued improvement in the outlook for the Philippine economy.

The government expects to top its official growth forecast of 7 percent this year on the back of domestic consumption and increased state spending on infrastructure, among others.

The BSP said the Philippine assets were also boosted by the resolution of the legislative deadlock in the US that led to the temporary shutdown of Federal services.

The US Congress was also able to avoid financial disaster by approving an increase in its legal borrowing limit, averting an unprecedented default that would have sent global markets on a downward spiral.

Investments in publicly listed shares made up 52.6 percent of all foreign placements for the month. This was followed by investments in government securities, which was 44 percent of the total, and placements in peso time deposits, which filled up the balance.

Inflows came mainly from the United Kingdom, Singapore, the United States and the Netherlands. Together, these four countries contributed 81.5 percent of all investments for the month.