More ‘hot money’ leaving RP

MANILA, Philippines - The local economy continues to suffer from harsh conditions in the global financial markets, with more foreign portfolio investments exiting as of October as investors shy away from risky assets such as those in the Philippines. Data released Thursday by the Bangko Sentral ng Pilipinas (BSP) showed that foreign portfolio or so-called "hot money" investments recorded a net outflow of $390 million for the month of October, an increase from a net outflow of $312.2 million in the previous month. This was also a reversal compared to the net inflow of $274.14 million in the same month last year. The 10-month tally registered a net outflow of $911.68 million, also worse compared to $521.7 million in outflows during the January-September period. "Risk aversion further intensified given the global financial crisis and slowdown in the US and other major economies," BSP Governor Amando M. Tetangco, Jr. said. Foreign portfolio investments are funds from foreign investors placed on local stocks, government securities, bank deposits, and short-term debt instruments. Such investments are also called "hot money" due to the speed at which these are invested in and out of an economy. On a gross basis, registered foreign portfolio investments totaled $490 million for the month of October alone, 79% of which went to shares listed at the Philippine Stock Exchange, 21% to government securities particularly Fixed-Rate Treasury Bonds, and the remaining 1% to peso-denominated bank deposits. However, these were offset by capital repatriations amounting to $884 million, with the withdrawals led by those who placed funds in bank deposits which cornered 46% of outflows. Data showed that 31% and 23% of outflows were attributed to investments in stocks and government securities, respectively. Gross investment inflows during the 10-month period reached $7.6 billion, 43% lower than the $13.4 billion recorded in the same period last year. The bulk of these investments — $5.2 billion or 68% of the total — went to stocks, but this was a 53% decline from $11 billion last year. Investments in peso-denominated government securities of more than $1.8 billion was a decrease of 17% year-on-year. Market players preferred shorter-term investments, with placements in bank deposits and money market instruments growing by 295% and 227%, respectively. The central bank had estimated hot money flows to end the year with a net inflow of $700 million, lower than the $3.52 billion recorded in end-2007. Monetary officials have said projections were being reviewed. — G.S. dela Peña, BusinessWorld