8-month net ‘hot money’ inflow surges 75% to $3.1B

Foreign portfolio investments continued to climb in August as the lackluster performance of industrialized economies pushed investors to place their money in emerging markets.

Monetary officials said the higher inflow of “hot money” reflected the confidence of investors in the growth prospects of the Philippines, at least in the short term.

The Bangko Sentral ng Pilipinas on Friday reported that net inflow of investments by foreigners in stocks, bonds and other securities issued by government and enterprises from the Philippines reached $394 million in August, up 75 percent from $225 million in the same month last year.

This brought the net inflow in the first eight months of the year to $3.1 billion, more than triple the $926 million recorded in the same period in 2010.

Gross inflow from January to August amounted to $11.8 billion while outflow reached $8.8 billion.

BSP Governor Amando Tetangco Jr. said the sustained rise in foreign portfolio investments was expected given the significant difference between the economic performance of industrialized countries and fast-growing emerging markets.

He added that the debt problems confronting countries in Europe have prompted investors to seek higher yields elsewhere, particularly in the Asia-Pacific region.

“[The increase in foreign portfolio investments] is a result of the risk that has arisen from the continuing uncertainty related to the debt problems in Europe,” Tetangco told reporters yesterday.

More than half or $6.2 billion of the gross inflow of foreign portfolio investments in the first eight months went to purchase publicly listed stocks.

Major beneficiaries of the equity investments by foreigners included holding firms, banks, property firms, telecommunication companies and utility firms.

About $5.4 billion of the gross inflow in the first eight months was accounted for by investments in government securities.

Government finance officials earlier said that the significant amount of investments in government securities followed the recent upgrades in the credit rating of the country and the national government’s declining budget deficit.

The balance of the total gross inflow was accounted for by investments in time deposits, trust funds and money market instruments.

The sustained rise in foreign portfolio investments this year was cited as one of the reasons for the appreciation of the peso.