Manila, June 21, 2003 By Donnabelle L. Gatdula (Star) Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura reported yesterday that the country’s portfolio investments or so-called "hot money" have started to flow back to the country in the past few weeks.

Buenaventura attributed the improvement in dollar inflows to the improving fiscal position of the National Government as well as the stable economic performance.

He noted that the net inflow of portfolio investments reached $190.6 million as of the first two weeks of June.

On a year-on-year comparison, however, the latest net inflow figure is still slightly lower by $4 million compared to $194.6 million in the same period in 2002.

"Uncertainties brought about by previous economic and political jitters are slowly disappearing and there are now better numbers for the Philippines," Buenaventura said.

Based on reports submitted by foreign custodian banks – among them HSBC and Standard Chartered Bank – to the BSP, gross hot money inflows so far this year stood at $459.9 million.

Buenaventura also noted that foreign currency deposit units (FCDUs) liabilities increased by $5 million from end-May to $12.848 billion as of June 6 this year.

"Stability in the macroeconomic numbers, specifically, the sustained benign inflation rate and the lower-than-programmed budget deficit of P75.4 billion against P87 billion for the first five months of the year, were the factors that kept FCDU deposit liabilities to remain strong," Buenanvetura said.

The BSP chief said the strong dollar inflows from overseas Filipino workers (OFWs) also contributed to this development.

He said the monetary authorities are thinking of revising the three-percent growth projection for the OFW remittance in 2004. Based on the latest BSP data, the OFW remittances registered growth of 8.7 percent.

For 2003, the BSP assumed flat growth in OFW remittances, largely because of the war in the Middle East early this year.

Buenaventura however said they may opt to keep their "conservative" assumption for the meantime while admitting that a revision of the targets might be necessary to reflect the impact of the growing demand for highly-skilled and higher paid local professionals abroad.

Most of the "hot money", Buenaventura noted, went to securities and equities market unlike the previous months wherein most of the foreign funds were invested only in government securities.

"There were mixed buying in the equities markets, too. Unlike in the first quarter when buying was only on government securities. This was the reason the stock market has gone up," he said.

He noted that the Philippine stock market index reached the 1200 levels with volume turnover hitting P1 billion, compared to the previous average of P200 million to P300 million a day.

Reported by: Sol Jose Vanzi

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