Hot money outflow continues in April

Speculative funds leave Philippines for 3rd straight month

MANILA, Philippines —  More hot money left the Philippines for the third straight month, with the net outflow hitting a two-month high of $351.87 million in April, reversing the $1.41 billion net inflow recorded in the same month last year, amid external headwinds caused by elevated inflation as well as rising interest rates in advanced economies led by the US.

Preliminary data released yesterday by the Bangko Sentral ng Pilipinas showed the Philippines yielded a gross inflow of $712.83 million worth of foreign portfolio investments registered with the BSP through authorized agent banks in April, a 68-percent drop from the $2.23 billion recorded in the same month last year.

The majority of registered investments or 57.3 percent were in securities listed in the Philippine Stock Exchange, particularly in banks, holding firms, property, food, beverage and tobacco as well as transportation services.

A total of 42.7 percent went to peso government securities, while less than one percent went into other instruments (less than one percent).

According to the central bank, the top five investor countries for the month were the United Kingdom, United States, Singapore, Luxembourg and Norway, with a combined share totaling 84.1 percent.

Likewise, gross outflows jumped by 29.3 percent to P1.06 billion from $823.32 million. The US received 70.9 percent of total outward remittances.

The foreign portfolio investments are also known as hot money or speculative funds, as these flow regularly among financial markets as investors attempt to ensure they get the highest short-term interest rates possible.

For the first four months of the year, the Philippines booked a net outflow of hot money amounting to $680.07 million. The country has been recording a net outflow since February this year.

The net outflow during the period was a complete reversal of the $1.39 billion net inflow recorded in the same period last year.

Gross inflows plunged by 29.5 percent to $3.65 billion from January to April this year compared with P5.18 billion in the same period last year.

On the other hand, gross outflows grew by 14.2 percent to $3.65 billion during the period from $3.79 billion a year ago.

The elevated inflation, as well as aggressive rate hikes delivered by global central banks led by the US Federal Reserve, created uncertainties in the financial markets.

The BSP Monetary Board, for its part, raised key policy rates by a cumulative 425 basis points since it started its tightening cycle in May last year to tame inflation and stabilize the peso.

As inflation cooled and the economy sustained growth, the central bank decided to take a prudent pause from its tightening cycle last May 18 by keeping the benchmark interest rate steady at a 16-year high of 6.25 percent.

The Philippines registered a net inflow of hot money amounting to $1 billion last year, reversing the net outflow of $2.4 billion in 2021 amid the impact of the COVID-19 pandemic.

For this year, the BSP further slashed its hot money inflow projection to $2.5 billion from $5 billion, but this is seen picking up to $3.5 billion in 2024.