Tuesday, 29 November 2011

Hot money flows surge to $3.59b

by Roderick T. dela Cruz
Manila Standard

Global funds continued to flow to emerging markets such as the Philippines, with offshore investors infusing and retaining $3.59 billion of their capital as of Nov. 5.

Bangko Sentral data showed that despite the global uncertainties stemming from the European debt problems, foreign portfolio investments, or hot money, yielded a net inflow of $145 million in the first trading week in November.

A net inflow means foreign fund managers chose to retain a part of their gross investments in local stocks, government securities, peso time deposits and other money market instruments, instead of pulling them out of the local market.

Bangko Sentral deputy governor Diwa Guinigundo said the Philippines had become a net capital drawer since the start of the year, despite uncertainties in August and September after the credit rating of the United States was downgraded from its top-notch status.

“There was no month in 2011 when foreign portfolio investments registered a negative figure or net outflow,” said Guinigundo.

Gross investments of foreign capital funds actually rose 55 percent to $14.3 billion as of November 5 from $9.3 billion during the same period last year while withdrawals of these funds also surged 63 percent to $10.8 billion from $6.6 billion.

As a result, net inflows climbed 35 percent to $3.59 billion from $2.67 billion during the same period.

Guinigundo noted that businesses remained optimistic about the prospects in the Philippine economy, where output is expected to increase despite external challenges.

Emerging markets such as the Philippines became a magnet for global funds which are searching for higher-yielding investment instruments outside the United States, Europe and Japan. These markets continued to expand in terms of output and demand.

Guinigundo said six out of nine economic indicators in the Philippines continued to show an improvement, which is a sign that economic activities will be better in the fourth quarter.

The country’s gross domestic product grew 4 percent in the first half of 2011.

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