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Net 'hot money' totaled $193M in Jan., says BSP


The net inflow of foreign portfolio investments into the Philippines eased in January compared with December last year, but was still higher compared with the year earlier level, the Bangko Sentral ng Pilipinas (BSP) reported Thursday. Also called "hot money," such investments totaled $193 million in January this year, down 55 percent from $425 million in December, but 14 percent higher than the $170 million recorded in January 2010, according to the central bank. The month-on-month decline can be attributed to massive selling in Philippine equities on heightened political tensions in Egypt last month, BSP Gov. Amando Tetangco Jr. said in a statement. "The decline seen last month may be attributed to profit-taking and to tensions in Egypt starting in late January which triggered selloffs," Tetangco said. Egyptian demonstrators who took to the streets for nearly three weeks finally brought down Hosni Mubarak on Feb. 11, after ruling the North African country for 30 years. The gross inflow of hot money in January totaled $1.537 billion, while $1.344 billion was taken out of the Philippines. In December, foreign portfolio investments amounted to $576.05 million with $405.92 million having pulled out of the country. Tetangco said the hot money used to buy shares listed on the Philippine Stock Exchange reached $616 million last month, up 41 percent from $436 million in January 2010. Forty percent of total foreign portfolio investments last month were used to buy Philippine shares, and 59.9 percent — or $921 million — was invested in peso-denominated government securities and in 90-day peso time deposits. Tetangco said about 90 percent of the total inflows came from the US, Singapore, Luxembourg, UK, and Hong Kong. He also said the outflows can be traced to the withdrawals in peso deposits, representing divestment proceeds from registered investments parked in accounts pending reinvestment or repatriation. Reaching record high The inflow of foreign portfolio investments hit a record $4.61 billion last year, or nearly 12 times than the $388.02 million recorded in 2009. Funds flooded emerging markets, including the Philippines, due to the fragile growth in developed economies like the US and Europe. The hot money investments last year surpassed the full-year target of $2.9 billion set by monetary authorities. These investments are called hot money because they could be taken out of the country as quickly as they came in. Tetangco had stressed the government's need to transform hot money or speculative investments into long-term investments. There is a need for long-term investments — such as infrastructure projects — so that sufficient amount of money circulating in the financial system could be used in productive areas, he said. "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 pointed out. He likewise said a chunk of the liquidity in the financial system is parked in the Bangko Sentral in the form of special deposit accounts amounting nearly P1 trillion. — JE/VS, GMA News