Hot money continues to queue out — BSP

By Ruben Hortelano

07/25/2008

More foreign funds left the country in the year to July compared to those that went in, resulting in a net outflow of $414 million during the period.

From January to the middle of July, so-called “hot money” outflows totaled $5.924 billion againts inflows of only $5.510 billion.

In the same period last year, in comparison, the Bangko Sentral ng Pilipinas (BSP) posted a huge net inflow of $2.868 billion.

Outflows reached only P5.694 billion at that time while gross inflows was at $8.562 billion.

In the first two weeks of July alone, however, a net inflow of $3.27 million was recorded, resulting from gross inflows of $260.98 million versus gross outflows of only $257.71 million, BSP data showed.

BSP officials said these were portfolio placements a week before the monetary board adjusted its policy rates upward by 50 basis points as countermeasure against rising inflation expectations.

An interest rate hike tends to encourage fund managers to stay invested in the Philippines as yield on financial instruments inflate as well.

Portfolio investments in the Philippines and across Asia have weakened significantly due to risk aversion, BSP Gov. Amando Tetangco Jr. said.

Spiraling oil and other commodity prices and prospects of weaker local corporate earnings tended to discourage fund managers from plunking significant portions of their holdings in the local markets, he said.

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