‘Hot money’ surges through November

FOREIGN PORTFOLIO investments surged nine times to hit a net of $3.446 billion as of Nov. 12, latest available data from the Bangko Sentral ng Pilipinas (BSP) showed.

Specifically, the data showed that the net inflow of foreign portfolio investments, also known as "hot money" due to the ease with which they enter and exit local markets, increased to $3.446 billion from the $372.02 million recorded in the same period last year. Gross inflows in those months nearly doubled to $10.197 billion from $5.63 billion, while outflows rose by a little more than a fourth to $6.751 billion from $5.258 billion.

For the week of Nov. 8-12 alone, the same data showed that "hot money" net inflow surged to $782.77 million from just $12.33 million a year ago. Gross inflows increased more than 10 times to hit $951.94 million from $87.72 million, while outflows more than doubled to $169.17 million from $75.38 million.

BSP Governor Amando M. Tetangco, Jr. acknowledged the continued flight of foreign investors from uncertainties that still hound developed economies in search of developing markets where they can park their funds.

"There are push and pull factors. Among the push factors is the shift of funds from advanced economies into emerging markets including the Philippines; so, there is a significant amount of liquidity globally and a significant part or portion of this liquidity is in emerging markets," Mr. Tetangco told reporters on Friday night. "As for the pull factors, this would be the strong economic performance of the emerging markets; also, the favorable performance of the financial markets in these countries like the stock market."

Mr. Tetangco also echoed suggestions to channel these investors’ interest to long-term projects. "For us to be able to transform these liquidities [sic] to productive uses, there’s got to be users or investors that will take advantage of the ample liquidity to finance their investment or development projects," he said.

He also noted that a large part of liquidity is parked with the BSP in the form of special deposit accounts (SDA). Economists have pressed the BSP to reduce the SDA rate of 4% to make parking funds in this facility less attractive.

But Mr. Tetangco said banks’ funds will naturally move to alternatives like well-planned development projects. "Banks will lend to viable projects."

The government has unveiled a list of 10 priority infrastructure projects worth P127.8 billion for next year alone, up to three of which are to be auctioned off to the private sector in first quarter. -- LDD