MANILA, Philippines — More speculative funds continued to leave the Philippines for the fifth straight month in September, with foreign portfolio investments yielding a net outflow amid increased market volatility, according to the Bangko Sentral ng Pilipinas (BSP).
Data released by the central bank showed that total foreign investments registered through authorized agent banks registered a net outflow amounting to a 17-month high of $367.3 million in September or more than 15 times the $24.2 million net outflow registered in the same month last year.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the net outflow last month was the highest since the $373.95 million recorded in April 2021.
Foreign investments registered by the BSP through authorized agent banks are also known as hot money or speculative funds as these flow regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible.
The Philippines has been booking net outflows of foreign portfolio investments for the past five months with $270.42 million recorded in May, $342.19 million in June, $103.14 million in July, $86.29 million in August, and $367.3 million in September.
For September, gross outflows of speculative funds inched up by 4.1 percent to $1.26 billion from $1.21 billion in the same month last year.
On the other hand, gross inflows coming mainly from Singapore, US, the United Kingdom, Luxembourg, and British Virgin Islands fell by 25 percent to $891.89 million from $1.19 billion.
Data showed the majority of the inflows, at 87.1 percent, were invested in securities listed on the Philippine Stock Exchange (PSE), particularly in electricity, energy, power and water; food, beverage, and tobacco; property; banks; and holding firms.
About 212.9 percent went to investments in peso government securities, while less than one percent went to other instruments.
Ricafort traced the declining net inflow of foreign portfolio investments to increased market volatility in September amid continued concerns locally and globally over elevated inflation and the rising trend in interest rates that increase borrowing costs.
Ricafort said the BSP Monetary Board is likely to follow the direction of the aggressive rate hikes by the US Federal Reserve.
He added that the recent signals of local policy rate hike of as much as 75 basis points on Nov. 17 by BSP Governor Felipe Medalla would help stabilize the peso exchange rate and overall inflation.
The relatively weaker peso exchange rate, which posted a new all-time low of 59 to $1, could also lead to higher import prices and overall inflation, further supporting local policy rate hikes, including another possible surprise/off-cycle rate hike to help stabilize the peso and overall inflation.
Despite the net outflows for five consecutive months, the Philippines managed to book a net inflow amounting to $222 million from January to September this year, reversing the $459 million net outflow recorded in the same period last year.
The central bank expects foreign portfolio investments bouncing back strongly with a net inflow of $4.5 billion for this year and $6.7 billion for next year.
Last year, the Philippines missed its net inflow target of $1.5 billion as it registered a net outflow of speculative funds amounting to $574.46 million, 86.4 percent lower than the $4.24 billion net outflow recorded during the height of the COVID-19 pandemic in 2020.