MANILA, January 31, 2005 (STAR) By Des Ferriols  -  The Bangko Sentral ng Pilipinas (BSP) has reported a surge in net foreign portfolio investments over the past three weeks of January, booking cumulative net foreign exchange inflow of $427.2 million compared to a meager $12.9 million recorded over the same period last year.

In just three weeks, the BSP said net foreign portfolio inflows nearly topped the whole-year figure of $486.8 million in 2004, indicating renewed investor interest in the Philippines despite a downgrade in its credit rating.

"This represents a very strong opening for the year, particularly compared to the amount that came in last year," said BSP Governor Rafael Buenaventura.

The data is contained in a new report based on direct applications to the BSP for registration of foreign portfolio investments and daily reports on registered foreign portfolio investment transactions submitted by banks under the computerized Foreign Portfolio Investment Monitoring System of the BSP.

The report, Buenaventura explained, covers investments directly registered by the BSP and all custodian banks funded by new foreign exchange inflows as well as outflows/capital repatriations pertaining to registered investments.

"In general, registration of foreign portfolio investments takes place no more than 10 days from the remittance of the foreign exchange funding these investments," Buenaventura said.

For the three-week period in review, Buenaventura said non-resident investments in PSE-listed securities and in government securities/money market instruments resulted in substantial net inflows of $263.3 million and $190.5 million, respectively.

On the other hand, non-resident investments in peso bank deposits netted a $26.6-million outflow.

According to the BSP, data for the comparable period in 2004 showed net inflows of $35.0 million and $6.3 million from investments in PSE-listed securities and government securities/money market instruments, respectively. Last year’s numbers also showed $28.4-million net outflow from investments in peso bank deposits.

Buenaventura explained that inflows of investments in peso bank deposits (inflows) refer to registered investments in peso time deposits that have a minimum maturity of 90 days.

Meanwhile, outflows of investments in peso bank deposits consist primarily of capital repatriations of interim time deposits funded by proceeds from divestment/sale of portfolio investments, mainly in PSE-listed securities and government securities.

On a gross basis, the BSP reported that foreign exchange inflows from portfolio investments amounted to $521.7 million during the first three weeks in review, about four times the $142.4-million inflows in the comparable period in 2004.

Withdrawals of foreign portfolio investments, on the other hand, totaled $94.5 million, 27 percent lower than the $129.5-million total in 2004.

"The much improved portfolio investment figures may have resulted from a number of positive factors," Buenaventura said. "Part of it was because of the favorable economic outlook for 2005 and part was due to strong profit prospects of certain sectors, including the mining industry."

Buenaventura said there was also heightened in optimism due to the improvements in the fiscal sector.

"The adoption of a flexible exchange rate policy and the maintenance of key policy rates and healthy international reserve levels also contributed importantly to improve investor sentiment," he said

Reported by: Sol Jose Vanzi

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