BSP Governor Amando M. Tetangco Jr. INQUIRER FILE PHOTO
Monetary officials are confident that investors will return in droves as the country stands out in the region as one of the few economies that will remain healthy in the face of global uncertainty.
Governor Amando M. Tetangco Jr. of the Bangko Sentral ng Pilipinas (BSP) also noted that foreign investors were merely overreacting to the news of the Federal Reserve’s tapered bond-buying program.
“The outflows we’ve seen so far are possibly part of the global portfolio rebalancing. At points of inflection in market sentiment, there is often an exaggeration in market reaction,” Tetangco said.
The rebalancing of fund managers’ portfolios followed the Fed’s decision to cut its $85-billion bond-buying program by a total of $20 billion a month starting next month.
The bond-buying or quantitative easing program was introduced in 2009 to infuse cash into the struggling American economy. Fed officials decided to reduce the monetary stimulus as the US economy showed signs of a stronger economy.
Documents from the central bank showed a net outflow of $813.5 million in foreign portfolio investments from the country. Portfolio investments or “hot money” refer to placements in peso-denominated government securities, local stocks and time deposits. The net outflow in the first three weeks of January was a reversal from the $976.38 million in net inflows registered in the same three-month period the year before.
Tetangco remained unfazed, saying investors were bound to recognize the country’s healthy economy that would set it apart from its neighbors in the region.
“In the case of the Philippines, we believe any such overshooting would soon be tempered as market participants revert to considering the country’s sound macroeconomic fundamentals that continue to be solidly in place,” Tetangco said.
He said the BSP would maintain its forecast for the balance-of-payments (BOP) position for now despite the heavy outflows at the start of the year. The BOP position is a summary of all the money that enters and leaves the country during a given period. The BSP expects the Philippines to post a BOP surplus of $3 billion this year from $5.3 billion in 2013.