Thu May 2, 2013 7:32pm IST (Reuters) - Standard & Poor's raised the Philippines' credit rating to investment grade on Thursday, the second debt agency to do so in less than two months, putting the Southeast Asian country on track to attract more foreign capital flows which are challenging policymakers. S&P upgraded the Philippines' foreign long-term debt by one notch to BBB minus, and foreign short-term debt to A-3, with a stable outlook, citing the country's strong external profile, moderate inflation and declining reliance on foreign currency debt. Most foreign funds are only allowed to hold investment-grade assets rated by either S&P or Moody's Investors Service. The influential JPMorgan Asia credit index (JACI), for example, considers investment grade debt classified by the two agencies. "Inflows have already been quite strong and are likely to remain a challenge for policymakers as foreign players become more aware of the Philippines as a viable investment destination," said Eugene Low, an economist at DBS in Singpaore. The upgrade came just a little over four months after S&P raised its rating outlook for Philippine debt to positive from stable in late December, and as the debt watcher downgraded its outlook for the country's larger neighbour Indonesia to stable from positive, citing concerns that much-needed economic reforms were losing momentum in Jakarta. "There is more evidence of structural economic improvement in the Philippines than in Indonesia in recent years," Credit Suisse economist Robert Prior-Wandesforde wrote in a note. "Also, the Philippines' so-called macro vulnerability indicators are generally better than those of Indonesia - the exception being on public finances." Fitch Ratings raised the Philippines' credit rating to investment grade in late March, a first for the Southeast Asian nation, in a move expected to boost investment and lift the country's long-term growth potential.