SDA funds drop to P1.85 T in May

MANILA, Philippines - Funds parked in the special deposit account (SDA) facility declined to a near four-month low in May, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Deposits on SDA – banks’ and trust departments’ funds with the BSP – totaled P1.852 trillion as of May 31, the lowest since Feb.8 when the figure reached P1.806 trillion, central bank data showed.

The total amount of idle money is now down 6.61 percent from its peak of P1.983 trillion as of April 12. The amount, however, remained up from P1.674 trillion recorded as of end last year.

 â€œIt will most likely decrease further as banks comply with the prohibition of access to SDA,” said Emilio Neri Jr., lead economist at Bank of the Philippine Islands, in a phone interview yesterday.

Last month, the BSP said it will prohibit singular investment management accounts from parking in the SDA by January 2014, while existing placements will have to be reduced beginning next month.

It marked the latest revision made on SDA access that followed three cuts on return it offers to two percent from the 3.5 percent. In July last year, foreign funds were also banned from the window.

“Funds may have gone to other investment outlets where they can get better returns such as government securities,” Neri said.

For his part, Jonathan Ravelas, chief market strategist at BDO Unibank Inc., said the current market turbulence presents an “opportunity to get in” the financial market for some SDA funds.

Markets have been rattled by signals the US Federal Reserve may scale down its $85-billion worth of monthly stimulus aimed at boosting the world superpower five years after the global financial crisis.

As a result, the Philippine Stock Exchange index, one of the world’s top performers last year, plunged 6.5 percent last Thursday, before recovering more than two percent on Friday and 1.56 percent yesterday.

“But of course you have to take into consideration the risk profile of the investors. For those who still want to be safe, they may not go equities but rather to time deposits,” Ravelas said.

Neri said the decrease in SDA funds proves that “the objective of the monetary authorities to drive funds out of the system is being achieved.”