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By Maricel E. Burgonio, Reporter
THE Bangko Sentral ng Pilipinas (BSP) expects
capital inflows to return to emerging economies like the Philippines
as the global credit crunch eases.
“Investors would adjust based on their risk
preferences. The emerging markets are expected to be resilient and
therefore would continue to be attractive to real money
investors,” BSP Gov. Amando Tetangco Jr. told reporters.
In March, net foreign portfolio investments went
down due to heightened worries about the US economic slowdown and
the tight credit conditions in major financial markets.
The Asian Development Bank earlier said global
financial markets were still in the middle of the credit crunch that
arose from the US subprime crisis. The regional lender however said
confidence will be restored in 6 to 12 months.
Based on its latest report, the BSP said net
foreign portfolio investments registered a net outflow of $197.7
million in March, a reversal from the $370-million net inflow on
February.
This was due primarily to the deepening global
credit crisis, which has also driven investors back to more
developed markets.
Portfolio investments involve money foreigners
invest in local stocks and other peso-denominated financial assets.
For the first quarter of the year, portfolio
investments reversed to a net outflow of $63.8 million, from an
$838-million net inflow in the same period last year.
Before the start of the credit crunch, many
Asian nations saw their currencies rise as low interest rates in
countries such as Japan and Switzerland encouraged investors to
borrow cheaply there to invest in fast-growing developing economies.
Volatility in foreign exchange inflows as a
result of lower portfolio investments would make it more difficult
and expensive for the BSP to smoothen the fluctuations in the
foreign exchange rate.
Tetangco earlier said the domestic economy will
further grow this year if the US Federal Reserve discontinues its
policy of easing interest rates, as the Philippines would benefit
from foreign portfolio inflows and strengthen the peso, which has
been weakening due to risk aversion.
The Fed has been cutting its rates to pump
liquidity into the US economy and avert a prolonged contraction.
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