Portfolio fund flows inward in January

Business Mirror

Posted at Feb 13 2009 02:23 AM | Updated as of Feb 13 2009 10:23 AM

For the first time since September last year, portfolio flows, also called “hot money,” flowed inward in January when this totaled $221.6 million.

This was a reversal from year-ago net outflows reaching $236.96 million, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.

The reversal gave substance to an earlier BSP claim that everything that could be pulled by foreign investors and their temporary or speculative placements in the country have, in fact, already been pulled out.

Still, BSP Governor Amando Tetangco Jr. carefully chose his words to explain the reversal.

“Some optimism on the inauguration of the new US president and the deceleration in the inflation rate to 8 percent in December may have contributed to the low level of capital withdrawal for the period,” Tetangco said.

Inflation the previous November stood at 9.9 percent, the same having already trended down steadily from its peak of 12.5 percent in August.

Gross inflows in January totaled $502.07 million versus gross outflows of only $280.48 million.

Nevertheless, these numbers paled in comparison with year-ago data showing gross inflows reaching $1.150 billion and gross outflow of $1.386 billion, or net outflows totaling $236.96 million.

The contraction in portfolio flows for the period demonstrates clearly that portfolio fund managers continue to be risk-averse to investing in emerging markets like the Philippines, according to Tetangco.

He said the bulk or $321.1 million of the gross inflows, equal to 64 percent, were used to purchase listed shares at the Philippine Stock Exchange, while the balance of 36 percent or $181 million were used to purchase peso-denominated government securities.

The fund managers that made these purchases came mostly from the United Kingdom, the Netherlands and from Singapore.

The bulk or 90 percent of gross capital outflows were uprooted from money-market placements and from peso bank deposits reaching $252.45 million during the month.

Only 3 percent of the outflows represented withdrawal of placements in the PSE, with another 7 percent representing the sale of their government securities holdings.

Tetangco earlier told a gathering of Security Bank investors and depositors the biggest risk hanging over the collective heads of Filipinos was the potential length of the ongoing global financial crisis.

A long, drawn-out economic downturn could obviously hurt the economy more badly than if this lasted only a short time, which was why the BSP is even now making sure there is enough liquidity readily available in the system to keep the economy going, Tetangco said.