Net 'hot money' inflow totaled $156B in 1st 3 weeks

The net inflow of foreign portfolio investments or "hot money" ended lower by 13 percent to $156.36 billion in the first three weeks of this year from a year ago's level of $179.70, the central bank said this weekend. The Bangko Sentral ng Pilipinas (BSP) said the contraction was due to concerns over inflation and the political unrest in Egypt, where demonstrators have taken to the streets for almost two weeks seeking for the departure of President Hosni Mubarak. Bank of the Philippine Islands president Aurelio Montinola said the initial weeks of the year has not been ideal in terms of both the performance of the stock market or in terms of interest rates. "January was a bit rocky for the banks because interest rates moved up and there were some reported losses in the stock market," Montinola said. For instance, banks offered to buy 91-day Treasury bills at an average yield of 3.34 percent — nearly five times the historic low 0.7-percent yield — fetched during the Jan. 10 auction. Accredited securities dealers were worried over rising inflation, which rose to 3.5 percent in January from 3 percent in December last year. But BSP Gov. Amando Tetangco Jr. has dismissed such fears, saying the Philippines continues to enjoy a benign inflation outlook in the near term. "The fundamentals and our most recent runs still point to a manageable, within-target inflation path for the next two years. We are not seeing demand-side pressures," Tetangco said. "One must recall that in the inflation-targeting framework, we only react to the demand side. We are watchful and we are ready to make any adjustments as and when necessary," he added. Tetangco pointed out that as global threats to inflation become apparent, there are also "very country-specific dynamics that each policy maker should consider." He said the central bank will revisit its basic inflation model this year and the next two years and see if there is basis to do a recast. "We will look at our model and see if any adjustment is necessary," he told reporters over the weekend. Net hot money inflow totaled $4.61 billion last year as fund managers saw huge earnings potentials in emerging markets like the Philippines. — JE, GMA News Online