'Hot money' expands to record $4B in November — BSP

The Bangko Sentral ng Pilipinas reported Thursday that foreign portfolio investments or "hot money" expanded to $4.18 billion as of end-November, a new record and nearly 10 times the $431.4 million registered a year earlier, the Bangko Sentral ng Pilipinas (BSP) said Thursday. Much of the money came from fund managers registered in the US, United Kingdom, Singapore, Luxembourg, and Hong Kong. The flow of foreign funds to the Philippines last month brought to $11.8 billion the total amount of hot money in the first 11 months of the year, nearly twice the $5.95 billion on record in the same period in 2009. Central bank data showed that inflows from January to November almost doubled to $11.8 billion compared to the $5.95 billion in the same period last year. The amount of foreign portfolio investments in the first 11 months exceeded the full-year target of $2.9 billion set by Philippine monetary authorities. Invested in stocks Portfolio investments are called hot money because these could be taken out of the country anytime. A chunk of the money was invested in shares of stocks on the Philippine Stock Exchange, according to the BSP. Hot money poured by fund managers in Philippine shares amounted to $7.7 billion as of end-November, up 71 percent from $4.5 billion in the same 11-month period a year earlier, the central bank said. Foreign portfolio investments were also placed in banks ($1.5 billion), property development firms ($1.38 billion), holding companies ($1.36 billion), telecommunications firms ($1.2 billion), and utility firms ($942 million), BSP data showed. The amount of hot money withdrawn from the Philippines, however, amounted to $7.413 billion from January-November 2010, up 36.2 percent from $5.441 billion in the same comparable period. Shift of funds BSP Gov. Amando Tetangco Jr. earlier said the shift of funds from advanced economies into emerging markets including the Philippines was responsible for the high level of hot money in the country. "[This is because of the] strong economic performance of emerging markets and also the favorable performance of the financial markets in this country," Tetangco said. “In the case of the Philippines, the stock market is up by about 40 percent. In terms of prospects for future growth, the emerging markets are also ahead of developed economies and the expectation is that future growth is going to be led by emerging markets," Tetangco added. But there is a need for the Philippine government to transform hot money, also known as speculative investments, into long-term investments, central bank chief stressed. "For us to transform this liquidity into productive uses, there has got to be users or investors that will utilize or take advantage of the ample liquidity to finance their development projects," Tetangco said. — VS/LBG, GMANews.TV