'Hot money' enters Philippines in February on easing virus curbs

Data from the Bangko Sentral ng Pilipinas released Thursday showed foreign portfolio investments recorded a net inflow of $274 million in February. A net inflow indicates more foreign funds entered the country as opposed to those that exited.

This was a larger haul compared to the $15 million net inflow recorded in January. Year-to-date, net inflows amounted to $289 million.

Why this matters

Foreign portfolio investments are also called “hot money” because it enters and leaves markets with ease, unlike foreign direct investments which are firmer commitments that generate jobs for Filipinos. These types of funds are sensitive to domestic and global developments. 

Back in February, Asian markets were faced with geopolitical tensions surrounding Russia's looming invasion of Ukraine which compounded elevated crude oil prices. Despite that, markets priced in positive developments in the Philippines' pandemic situation as cases steadily declined.

Sought for comment, Nicholas Antonio Mapa, senior economist of ING Bank in Manila said the relaxation of restrictions in the country put markets at ease in February.

But this would likely reverse in March as the Philippine Stock Exchange endured successive slumps as the spectre of war in Eastern Europe affecting oil prices would materialize, Mapa said.

"February was a month of optimism for the markets with covid cases in the Philippines on the downtrend and with alert levels subsequently lowered. The stock index rose sharply then on hopes for faster growth," he said in a Viber message.

"Optimism over the outlook may have taken a hit in March however and we expect the flow of funds to reverse at the next report," he added.