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Foreign hot money inflows soar 13x to $1.936B in H1 |
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By Des Ferriols
The Philippine Star 07/11/2005 Despite the political turmoil hounding the Arroyo administration, foreign hot money inflows continued to pour into the country in record levels as offshore investors gobbled bargain stocks sold by pessimistic local investors. Analysts said markets will be on tenterhooks this week amid worsening political turmoil with the Arroyo administration resolutely ignoring calls for the resignation of the President. Data from the Bangko Sentral ng Pilipinas (BSP) indicated that for the first six months of the year, net foreign portfolio investments reached $1.936 billion, 13 times the $150 million net inflow over the same period last year and four times the $86.8 million recorded for the whole of 2004. According to BSP data, total inflows reached $3.698 billion during the six-month period while outflows reached $1.761 billion, still leaving close to $2 billion at the end of the period. As calls mounted for President Arroyo to resign, speculative foreign portfolio investments reached $126.3 million in the last week of June while outflows reached $39.2 million, leaving a net inflow of $87.1 million. National Treasurer Omar Cruz said foreign portfolio investments are keenly interested in Philippine listed stocks, buying issues dumped by local investors. "You can see that they are still looking for the market to go up," Cruz said. Market optimism has been building up following the passage of the expanded value added tax (EVAT) law, interrupted only by the suspension order of the Supreme Court and the ensuing leadership crisis in the Arroyo administration. Despite all the noise, however, the BSP reported that registered portfolio investments poured into securities listed at the Philippine Stock Exchange (PSE). PSE-listed stocks, according to the BSP, attracted $3.549 billion worth of foreign hot money, accounting for 68.9 percent of total inflows for the six-month period. Government securities, on the other hand, accounted for 30.5 percent of total inflows, amounting to $1.127 billion while trickles went into peso bank deposits and money market instruments. Total inflows, according to the BSP, were about 3.7 times the $999.2 million recorded over the same period last year. On the other hand, outflows/capital repatriations of registered portfolio investments amounted to $1.761 million or twice the $849.2 million figure recorded for the whole of 2004. Foreign hot money flows, however, are expected to slow down in the first week of July as the market assesses the fall-out from the resignation of the Arroyo administration’s entire economic team led by Finance Secretary Cesar V. Purisima and Budget Secretary Emilia Boncodin. According to market analysts, the July schedule of the SC hearings would be crucial in determining whether foreign investors would stay in the market or abandon Philippine equities entirely. The Arroyo administration had been counting on the implementation of the VAT to plug the gaping hole in the national budget and reduce its need to borrow from both the domestic and the foreign markets. |
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