The decision of the U.S. Federal Reserve to scale down its stimulus program originally meant to stimulate the ailing American economy has taken its toll on the Philippines and other Asian emerging economies. According to the Bangko Sentral ng Pilipinas, the Philippine's central bank, the Fed's decision resulted in a massive outflow of foreign portfolio investment from the country in January as " investors started to divert funds back to the U.S. as the American economy exhibited more signs of recovery." The Fed's monthly bond purchases was cut back from 85 billion U. S. dollars to 75 billion U.S. dollars in December and further to 65 billion U.S. dollars in January In a statement, the central bank said that foreign portfolio investment or "hot money," reversed to a net outflow of 1.8 billion U.S. dollars in January from a net inflow of 1.27 billion U.S. dollars in the same month last year. This was the biggest monthly outflow of portfolio capital on record, the central bank said. The term "hot money" commonly used in financial markets refers to the flow of funds or capital from one country to another in order to earn short-term profits. This kind of investment can move very quickly in and out of the market and could lead to market instability. In the Philippines, portfolio investments are placed mostly in shares listed on the Philippine Stock Exchange, government securities, and peso-denominated time deposits. Registered investments in January reached 1.3 billion U.S. dollars - less than half the 2.8 billion U.S. dollars in gross investments that entered the country the year before. These investments were offset by the 3.1 billion U.S. dollars that flowed out of the country last month. While most analysts predict that the U.S. Fed's action could trigger a region-wide economic slowdown, Takehiko Nakao, president of the Manila-based Asian Development Bank, has expressed confidence that emerging Asian economies will be able to weather its impact, predicting growth of about 6 percent this year and next. In an interview last month in Tokyo, Nakao said that the Asian market has already incorporated elements of the tapering-off to some extent and "there was a certain overreaction on the side of the market." Nakao said that a strengthening of the U.S. and Japanese economies should help emerging Asian nations in 2014. "At the same time, it's important that policy makers in the region use the period of stability to address domestic policy needs," he said. Japan and the U.S. are the two biggest markets of export products of the Philippines and other Asian countries. Philippine socio-economic planning secretary Arsenio Balisacan also allayed fears that the current volatility of the financial market would disrupt the country's high growth trend. "Portfolio capital may come and go quickly but foreign direct investments (FDI) are determined by fundamentals," Balisacan said. But what Balisacan did not mention is the fact that the Philippines has been the laggard as recipient of FDI inflows among the members of the Association of Southeast Asian Nations (ASEAN) A report by the research arm of the Metropolitan Bank & Trust Co. (Metrobank), one of the country's biggest banks, said that while there was a surge in the inflow of FDI to the Philippines in November last year, the country remains on the tail-end of FDI inflow recipients in the region. The country's net FDI inflow rose to 286 million U.S. dollars in November, bringing the 11-month figure to 3.648 billion U.S. dollars, or 37 percent higher than in the same period in 2012. "This may be seen as an improvement from five years ago as the YTD (year to date) figure breached the 12-year average of FDI flows which is near the 2-billion-U.S. dollar mark," Metrobank Research said. However, the research unit pointed out that the Philippines' annual average FDI from 2000 to 2012 amounted to 1.547 billion U.S. dollars, far below Thailand's 7.223 billion U.S. dollars and Indonesia's 6.208 billion U.S. dollars. The country also lagged behind Malaysia, whose annual average FDI in the 12 years to 2012 totaled 5.885 billion U.S. dollars and Vietnam with 4.545 billion U.S. dollars. The World Investment Report for 2013 released by the United Nations Conference on Trade and Development (UNCTAD) late last year also showed that the Philippines lagged behind other ASEAN countries in FDI inflows with only 2.797 billion U.S. dollars recorded in 2012. The UNCTAD report said that in 2012, Singapore's FDI inflows were the highest at 56.65 billion U.S. dollars, followed by Indonesia with 19.85 billion U.S. dollars and Malaysia with 10.07 billion U.S. dollars.