‘Hot money’ flow slows to a trickle

MANILA, Philippines – The flow of foreign portfolio investments to the Philippines sharply dropped in April as global economic uncertainties, particularly the prolonged debt crisis in Europe, fueled risk aversion among investors worldwide.

The Bangko Sentral ng Pilipinas Thursday reported that the net inflow of foreign portfolio investments reached $333.43 million in April, falling by 51 percent from the $673.8 million reported in the same month last year.

This brings the net inflow of foreign “hot money” in the first four months of the year to $772.4 million—down by 53 percent from the $1.65 billion recorded in the same period a year ago.

Gross inflows of foreign portfolio investments reached $1.48 billion in April, BSP data showed. In the first fourth months, it totaled $1.7 billion.

Monetary officials said the decline in hot money flow was due to lingering uncertainties in the global economy.

They said that the prolonged debt crisis in the euro zone and the volatile US economy had kept some foreign fund owners in the sidelines, spooking them into holding on to their dollars instead of investing the cash in emerging markets like the Philippines.

But foreign capital inflows are considered to be volatile, and there is a possibility that the amount of hot money coming in may grow in the months ahead, BSP officials said.

They added that yield-seeking investors could change their minds and invest in peso-denominated portfolio assets as the euro zone and the US economy remained sluggish.

Most of the hot money that flowed into the Philippines were used to purchase publicly listed stocks and government securities.

Purchase of stocks traded in the Philippine Stock Exchange reached $248 million, while purchases of government securities amounted to $96 million.

The biggest sources of foreign portfolio investments were from fund owners based in the United States, the United Kingdom, Singapore, Luxembourg, and Hong Kong.