Net 'hot money' totaled $650M as of February 11

The net inflow of foreign portfolio investments expanded to $650.06 million as of Feb. 11, from $235.4 million in the same period last year, the Bangko Sentral ng Pilipinas (BSP) said over the weekend. The central bank said the flow of funds known as hot money picked up momentum in the first two weeks of February as investors started to see the resolution of political conflicts in Egypt. Egyptian demonstrators who took to the streets for nearly three weeks finally brought down Hosni Mubarak on Feb. 11, after 30 years in power. Foreign portfolio investments — usually invested in shares listed on the Philippine Stock Exchange — are called hot money because they could be taken out of the country as quickly as these were invested in stocks and government securities. BSP records showed that gross foreign portfolio investments almost tripled to $2.41 billion as of Feb. 11, from $836.8 million in the same period last year. On the other hand, outflow of foreign portfolio investments reached $1.76 billion from $601.5 million in the same period, according to the central bank. In January 2011, hot money totaled $193 million, up 14 percent higher from $170 million recorded in the same month last year,central bank records showed. "The decline seen last month may be attributed to profit-taking and to the social unrest in Egyp,t starting in late January, which triggered selloffs," BSP Gov. Amando Tetangco Jr. had said. Investments in emerging markets The inflow of foreign portfolio investments hit a record $4.61 billion last year, or nearly 12 times more 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 and those in Europe. Hot money last year surpassed the full-year target of $2.9 billion set by monetary authorities. 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