‘Hot money’ inflow slowed in January

The flow of portfolio investments to and from the Philippines fell in January as both local and foreign fund owners adopted a cautious stance in the wake of a prolonged debt crisis in the Europe and the continued weakness in the US economy.

The Bangko Sentral ng Pilipinas said investor sentiment was dampened by an uncertain outlook on the global economy, which many believed could be dragged by the crisis in the Western region led by the debt woes of Greece.

Documents from the Bangko Sentral showed that inflow of foreign portfolio investments amounted to $1.2 billion in January, down 20 percent from $1.5 billion in the same month last year.

On the other hand, outflow of portfolio investments reached $627.31 million, down 53 percent from $1.34 billion over the same period.

As the decline in the outflow outpaced the drop in the inflow, the country still registered a net inflow of foreign portfolio investments of $586 million during the month, up more than 200 percent from $193 million.

“Investments and outflows were lower compared to last year as investors remained cautious due to renewed worries over Greece’s debt problems and the cut by the International Monetary Fund of its [global] growth outlook,” the Bangko Sentral said in a statement.

In January, fears of a potential default by Greece rose as policymakers were still discussing rescue options. Public protests against proposed austerity measures in Greece, which needed to implement such measures to get a bailout package, complicated matters.

A cut in credit ratings of some Euro zone economies also dampened the overall outlook on the global economy.

Bangko Sentral documents further showed that the inflow of foreign hot money in January came mainly from the United Kingdom, Singapore, the United States, Luxembourg and Hong Kong.

The inflow in the form of investments in equities benefited mostly banks and telecommunications, holding, utility and property firms.

Net investments in securities listed on the Philippine Stock Exchange amounted to $385 million; in peso-denominated government securities, $199 million; in money market instruments, $200,000, and in peso time deposits, $1 million.