Bangko Sentral: Emerging markets to see more forex inflows once US, euro economies settle

More foreign exchange inflows will resume once the crisis in Europe and the US have eased or are resolved, according to an official of the Bangko Sentral ng Pilipinas.   “After the dust has settled, I would expect foreign exchange inflows to resume, BSP Deputy Gov. Diwa Guinigundo told reporters Monday in response to emailed queries.   “I believe we have a very good combination of monetary, foreign exchange and fiscal policies at present. I don't think we should contemplate of additional measures to prevent foreign exchange outflows,” Guinigundo noted.   Still, foreign capital would continue to flow to emerging markets including the Philippines, despite the sovereign debt crisis in Europe and the economic slowdown in the US, he said.   The Philippines would continue to attract foreign capital due to its strong macroeconomic fundamentals as reflected by the stronger-than-expected gross domestic product (GDP) growth in the first quarter amid a low inflation environment, BSP deputy governor Diwa Guinigundo said   “We have the pull factor of strong macroeconomic fundamentals and very few would argue against that especially in the light of continued search for yields and safe haven,” Guinigundo stressed.   The decline in foreign exchange inflows in the past few months due to the deleveraging in Europe and economic uncertainty in the US was a normal reaction among investors, the Bangko Sentral official noted.   “I am not exactly losing sleep because of weak portfolio flows. This is something expected because of risk aversion as a result of sustained deleveraging in Europe and adverse economic reports from the US,” he explained.   BSP data showed the net inflow of speculative investments or "hot money" dropped by more than 50 percent to $772.4 million in the first four months of the year from $1.646 billion a year earlier, as withdrawals from Philippine stocks outpaced placements.   Gross inflows declined by 12 percent to $5.507 billion in the first four months of the year from $6.262 billion a year earlier, and gross outflows rose by 2.6 percent to $4.735 billion from $4.616 billion.   Sources of foreign portfolio investments were the US, UK, Singapore, Luxembourg, and Hong Kong, according to the Bangko Sentral. —VS, GMA News