'HOT MONEY' FLEES ON U.S. SUBPRIME JITTERS
MANILA, SEPTEMBER 1, 2007 (STAR) By Des Ferriols - Net portfolio investments or ‘hot money’ fled from the local equities market in the early part of August, spooked by the global effects of the subprime mortgage credit crisis in the United States.
Accordingly, outflow of ‘hot money’ amounted to $451.51 million, exceeding inflow of $332.4 million for the first two weeks of August resulting in a net outflow of $119 million.
Analysts said the net outflow recorded during the two-week period reflected the selloff at the Philippine Stock Exchange (PSE) which was, in turn, triggered by massive selloff of global stocks as investors panicked over the fallout from the US credit market.
Global equity prices plunged on Aug. 10 as investors panicked over news that the problems in the US subprime mortgage sector are spreading beyond the US property market to the international financial sector.
With fears of a global financial fallout, the Philippine Stock Exchange index plunged by nearly 200 points to settle below the 3,000 point level at 2,942.31 on Aug. 16.
Since then, however, Philippine stocks have recovered as the US Federal Reserve Board cut its headline policy rates to release liquidity into the system.
By the second week of August ending on the 17th, BSP data showed that net outflows slowed down to $44.89 million with total gross inflows amounting to $285.81 million.
The weekly flows, however, showed that from the beginning of the year to the end of the third week of August, total net foreign portfolio inflows still amounted to $3.472 billion compared to the $1.016 billion recorded over the same period in 2006.
Despite the initial assault in the local stock market, the BSP however, said foreign exchange inflows would continue to be strong and this year’s balance of payment (BOP) surplus would be “substantially” higher than the $2.9 billion originally projected for this year.
The BSP said its on-going review of the country’s projected balance of payments for 2007 indicates better figures than originally expected even with the current turmoil in the financial market.
According to BSP Governor Amando M. Tetangco Jr., the surplus in the first seven months of the year already yielded over $4.5 billion.
“We can not release the numbers yet but it will be substantially higher than $2.9 billion,” Tetangco said.
Based on BSP data, net foreign portfolio investments soared to $3.6 billion in the first seven months of the year, hitting $1.1 billion in
July alone due to a series of initial public offering during the period.
The August numbers are expected to be a dramatic reversal but for July, data from the BSP revealed that net inflows soared more than three times last year’s levels.
Data from the BSP revealed that net inflows of registered foreign portfolio investments surged in July due to several large initial and follow-on orders.
In July, the market was abuzz with the stock offerings that included Aboitiz Power Corp., GMA Holdings and Vista Land and Lifescapes Inc.
The market was also eager to buy into the stock offer of the Philippine National Oil Co. which offered an additional 20 percent of its shareholdings in PNOC-Energy Development Corp.
On a gross basis, registered foreign portfolio investments in July amounted to $2.1 billion and 95 percent of the inflows were invested in stocks listed at the PSE.
Chief News Editor: Sol Jose Vanzi
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