‘Hot money’ inflow expected to slow down

The inflow of “hot money” in the first two weeks of January may slow down, the way it did in 2011 when the central bank posted a net inflow of $4.1 billion, down by 11.5 percent year-on-year.

Data from the Bangko Sentral ng Pilipinas showed that, as of Jan. 13, foreign portfolio investments registered a net inflow of $239.84 million.

During those weeks, $526.21 million came in while $286.37 million flowed out. The net result is a 13.1-percent decline from the $276.1 million posted in the same period of 2011. Back then, $823.65 million came in, while $547.5 million flowed out.

The balance of hot money transactions in 2011 fell from that reported in 2010 as the uncertain outlook on the global economy prompted investors to shy away from perceivably risky assets, such as those from emerging markets like the Philippines.

Earlier, the BSP said the prolonged debt crisis in the euro zone and the slow recovery of the US economy from its recession in 2009 led to the drop in the net inflow of foreign investments in the country’s stocks, bonds and other securities.

The decline in portfolio investments last year was attributed largely to an anemic appetite for equities.

The BSP said that shares listed in the Philippine Stock Exchange recorded a net outflow of $170 million.

In December alone, the net inflow of foreign hot money reached $140 million, down by some 72 percent from the $490 million seen in the same month of 2010.

The year-on-year drop in foreign portfolio investments reversed the trend seen earlier this year, when hot money inflows were surging as investors became optimistic over the global economy.

Economists said the sentiment of some foreign fund owners turned from good to bad toward the end of the year as the euro zone failed to significantly address its debt woes while the US economy continued to perform poorly.