'Hot money' tops $2B, Bangko Sentral says

Foreign portfolio investments or “hot money" topped $2 billion as of the first week of May as capital continued to flow into emerging markets including the Philippines, the Bangko Sentral ng Pilipinas (BSP) said Friday. Economic uncertainties in developed markets, like the US, Japan in some European countries continue to drive fund managers toward less volatile markets. Hot money or speculative funds total $2.85 billion as of May 6, or 187 percent more than the $725.55 million recorded a year earlier, the BSP said. A chunk of the money was invested in shares of stocks listed on the Philippine Stock Exchange, BSP records showed. Most of the funds came from Singapore, US, UK, Luxemburg, and Hong Kong. Portfolio investments are also called hot money because they could be withdrawn from the country fast. Such investments are flooding emerging economies as the economic recovery of developed markets remains peppered with uncertainties, BSP Governor Amando Tetangco Jr. earlier said. "Strong marcoreconomic fundamentals buoyed the keen interest in portfolio investments to the country in 2011, in contrast to a year ago when uncertainties loomed in April, a month before the May 2010 Philippine elections, leading investors to remain in the sidelines," Tetangco explained. Foreign portfolio investments in the Philippine reached a new record of $4.61 billion last year, up nearly 12 times from the $388.02 million in 2009 Monetary authorities said there is no need to restrain the flow of foreign capital into the country as the economy can still absorb the inflows without fanning inflation. The flow of foreign exchange into the country remains under control, BSP Deputy Governor Diwa Guinigundo also said in an earlier interview with reporters. — VS, GMA News