Hot money rebounds in 2009, posts net inflows

Foreign investors continued to put their money in Philippine stocks last year, resulting in net hot money inflows of $388 million amid the global economic slump, the central bank said on Thursday. In a statement, the Bangko Sentral ng Pilipinas (BSP) said the inflows were a major turnaround from $1.8 billion in net outflows in 2008, when the US-led financial crisis reached its height. "Amid the global recession, investor interest in the country was sustained by stable prices and low interest rates, the continuing growth in overseas Filipino remittances, robust reserves, a healthy banking system, and sound macroeconomic fundamentals," it said. Portfolio investments or hot money are extremely volatile short-term capital that moves on a short notice to any country providing better returns. Unlike foreign direct investments, hot money can leave at the first sign of trouble. For December alone however, transactions yielded a net outflow of $43 million, although investments registered during the month were 7 percent than a month earlier at $462 million. Registered foreign portfolio investments for the year reached $6.3 billion. Investments in listed Philippine shares accounted for three-quarters of the total, while a fifth of the investments were placed in peso-denominated government securities. The balance was put in peso time deposits and money market instruments, the central bank said. The US, Britain, Singapore, Japan and Hong Kong were the top five investor countries, collectively accounting for 80 percent of registered investments. Gross hot money outflows reached $6 billion last year, about 89 percent of which went to the US, followed by Singapore and Britain (3 percent each). Registration of inward foreign investments with the central bank, which is voluntary, entitles the foreign investor to buy foreign exchange from authorized banks for repatriation of capital and payment of shareholders' share in profits. — GMANews.TV