ASEAN KEY DESTINATIONS
More "hot money" flows into Philippines
Pauline Revillas, Metropolitan Bank and Trust Co. research analyst, said the second round of quantitative easing (QE2) had widened the interest rate differential between the US and emerging markets, increasing investor appetite for higher-yielding, riskier assets. Moreover, the surge in capital flows to emerging markets brought about by QE2 complicated the exit strategies of these economies through increases in their interest rates, she said.
Foreign portfolio investments in November yielded a net inflow of $1.7 billion from $73 million in the same month last year, bringing the cumulative hot money inflows to $4.2 billion, or nine times the $431 million recorded in the same 11-month period last year.
Tetangco said monetary authorities still do not see a need to impose capital controls, adding that the toolkit they imposed has been efficient.
Citing Asian financial ministers' exchange of information, the BSP chief said emerging markets are facing signal issues, including the increase in capital inflows. However, these discussions also showed that the response of the central banks in the region have not been very different, he said.
So far, the BSP prefers liberalizing outflows of foreign capital as a means to soften the impact on the exchange rate of the surge in inflows, which come largely in the form of investments in the country's stock market and other financial instruments.
To ease the appreciation of the peso, the BSP has raised the ceiling on the amount of foreign currency that may be brought out of the country without submitting documentary requirements to the central bank.
Currently, the ceiling is set at $30,000 for payments for foreign services and $30 million for investments offshore.
Local share prices ended last week in positive territory but the peso continued to trade weaker against the dollar amid concerns on the US economy.
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