‘Hot money’ inflow surges in November

MANILA, Philippines— The net inflow of speculative funds more than quadrupled to $488.75 million in November from $109.56 million in the same month last year due to better global economic conditions, according to the Bangko Sentral ng Pilipinas (BSP). Data released by the BSP Thursday evening showed foreign investments registered through authorized agent banks were the highest since the $1.41 billion net inflow recorded in April.

Foreign investments registered by the BSP through authorized agent banks are also known as hot money or speculative funds as they flow regularly between financial markets because investors want to ensure that they get the highest short-term interest rates possible.

The country has been recording net outflows of foreign portfolio investments for the past five months, with $270.42 million in May, $342.19 million in June, $103.14 million in July, $86.29 million in August and $367.3 million in September before recording a net inflow of $83.44 million in October.

For November, gross inflows of hot money coming mainly from the United Kingdom, the United States, the Netherlands, Luxembourg and Singapore reached $1.05 billion.

According to the BSP, a majority or more than 55 percent of the inflows were invested in securities listed on the Philippine Stock Exchange (PSE), particularly in banks, holding firms, property as well as food, beverage and tobacco.

About 44.8 percent went to investments in peso government securities, while the balance went to other instruments.

On the other hand, gross outflows last month amounted to $565.71 million. The US received close to 72 percent of the total outward remittances.

From January to November, the Philippines managed to book a net inflow amounting to $793.75 million, reversing the $501.74 million net outflow recorded in the same period last year.

Gross inflows retreated by 8.5 percent to $11.25 billion during the 11-month period compared to a year-ago level of $12.29 billion, while gross outflows declined by 18.7 percent to $10.46 billion from $12.86 billion.

Last year, the Philippines missed its net inflow target of $1.5 billion as the country registered a net outflow of speculative funds amounting to $574.46 million, 86.4 percent lower than the $4.24 billion net outflow recorded at the start of the pandemic in 2020.

Due to uncertainties, the BSP slashed its projected foreign portfolio investments to $3.5 billion from $4.5 billion for 2022 and to $5 billion from $6.7 billion for 2023.

While conditions improved after the aggressive rate hike delivered by the US Federal Reserve succeeded in cooling inflation, the US is expected to slip into recession next year due tighter global financial conditions.

The Philippines recorded a 7.7-percent gross domestic product (GDP) growth from January to September, faster than the 6.5 to 7.5 percent target penned by economic managers.

The expansion is seen slowing to a range of six to seven percent next year due to the impact of slower global economic growth.