$805 million in hot money exits Philippines in 5 months

MANILA, Philippines — The outflow of speculative funds hit $805 million in the five months to May, reversing the $1.1 billion net inflow in the same period last year, as fewer hot money entered the Philippines for the fourth straight month in May.

Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) showed the inflow of foreign portfolio investments with the central bank through authorized agent banks from January to May fell by 27 percent to $4.49 billion from a year ago level of $6.15 billion.

On the other hand, outflows increased by 5.4 percent to $5.3 billion during the five-month period from last year’s $5.03 billion.

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

For May alone, the country booked a smaller outflow of $124.49 million, 54 percent lower than the $270.42 million outflow recorded in the same month last year.

According to the BSP, registered investments in May declined by 12.5 percent to $844.72 million from $969.21 million in the same month last year.

Majority of registered investments or 69.7 percent were in securities listed in the Philippine Stock Exchange (PSE) particularly banks, food, beverage and tobacco, holding firms, property and transportation services.

A total of 30.3 percent went to peso government securities, while less than one percent were in other instruments.

The BSP said the top five investor countries for the month were the United Kingdom, US, Singapore, Luxembourg and Hong Kong with combined share to total at 86.6 percent.

Likewise, gross outflows declined by 21.6 percent to $969.21 million from $1.24 billion. The US received 66.2 percent of total outward remittances.

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

The BSP’s 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 sustained economic growth, the central bank decided to extend its prudent pause to two straight rate-setting meetings as it kept the benchmark interest rate steady at a 16-year high of 6.25 percent last June 22.

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.

The BSP sees a hot money net inflow of $2.5 billion this year and $3.5 billion next year.