NET HOT MONEY INFLOW JUMPS 141% IN JANUARY

MANILA,  February 13, 2004 (STAR) By Des Ferriols - Despite rising political concerns, foreign investors continued to put their money in the local financial markets, helping net portfolio investments to surge last month over the year ago level.

Net foreign portfolio investments rose by 141 percent to $47.8 million in January from only $19.8 million in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Portfolio inflows surged to a record $206.6 million last month, rising by more than 150 percent from only $80.2 million in the same period a year ago.

Outflows, on the other hand, amounted to $158.8 million up from $60.4 million in January last year.

The BSP said the January performance reflected foreign investorsí interest in domestic listed companies and government securities in the hope of cashing in on profits when prices recover.

Last year, however, the net portfolio inflows were pushed up by the settlement of block purchases of Globe Telecom shares that the Ayala group bought back from Deustche Telekoms.

BSP Governor Rafael Buenaventura said this yearís numbers were due to the combined effects of the low base year in early 2003 and the sporadic outbursts of optimism triggered by low prices that attracted bargain-hunters.

The BSP data came from the five major custodian banks which report portfolio investment flows on a weekly basis.

These figures indicated that foreign investors were more optimistic about government securities and money market instruments than in the stock market which has not been able to recover from its slump since 1997.

The BSP is expecting foreign direct investments to reach $900 million for the whole of 2004.

The BSP said foreign direct investments are expected to go to the countryís most attractive sectors, namely: power, information technology, electronics and telecommunications

According to Diwa Guinigundo, managing director of the BSPís economic research department, the conduct of the coming presidential elections would be critical in assuring investors that the Philippines is still a good destination for investments.

"Once the uncertainty is removed after the elections, foreign direct investments would start to come in earnest," Guinigundo said.

"Itís really just the uncertainty that creates the hesitation. When people are not sure how things would turn out, they would wait and see first," he added.

Guinigundo said the power sector continued to attract the biggest portion of foreign direct investments as generation companies expand their current capacities in anticipation of an increase in economic activity.

Likewise, Guinigundo said IT and electronics were growth areas that would continue to attract investors since the country has comparative advantages over its primary competitors in the region.

Telecommunications, on the other hand, is expected to sustain its surge as the consumer market expands further with the rise in income from the deployment of more Filipino workers overseas.

Portfolio investments, Guinigundo said, are also expected to grow this year as expectations improve in anticipation of the recovery after the elections.

"Considering the disruptions we saw this year, we still saw an increase in portfolio investments compared to last year," he said.


Reported by: Sol Jose Vanzi

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