‘Hot money’ investments surged in July

Net inflow of foreign portfolio investments surged in July to the highest in nearly two years as the upgrade in the country’s credit rating led to upbeat sentiment for the Philippines.

The Bangko Sentral ng Pilipinas reported Thursday that the net inflow of foreign “hot money,” or investments by nonresidents in stocks, bonds and other portfolio assets from the country, hit $962.75 million in July.

This was up by more than three times from $301.95 million in the same month last year and a reversal of the net outflow of $7.69 billion in June.

Data from the BSP showed that the net inflow in July this year was the highest in 20 months. The last time the net inflow reached more than the latest figure was in November 2010, when it stood at $1.67 billion.

According to the central bank, gross inflow of foreign portfolio investments during the month amounted to $10.4 billion, while outflows reached $8.57 billion.

The inflows were mostly invested in publicly listed stocks, particularly of property, holding, services and telecommunication companies.

The increase in “hot money” inflows during the month was credited to the improved credit rating of the Philippines.

Standard & Poor’s raised the country’s credit rating in early July from two notches to just one notch below investment grade, citing improving macroeconomic fundamentals.

For the first seven months of the year, however, the net inflow of foreign portfolio investments was recorded at only $1.83 billion. This was down by 31 percent from $2.67 billion in the same period last year.

The decline in the first seven months was attributed to global risk aversion in the earlier months as the prolonged debt crisis in the eurozone dampened appetite for foreign investments emerging-market assets, such as peso-denominated stocks and bonds.