‘Hot money’ inflow hits 4-month high in November

MANILA, Philippines — More speculative funds flowed into the Philippines, yielding a net inflow of $672.86 million in November, the highest in four months or since the $962.04 million recorded in July, according to the Bangko Sentral ng Pilipinas (BSP).

Latest data from the BSP showed that last month’s net inflow of foreign investments was 37.7-percent higher than the $488.75 million recorded in November last year and a reversal of the $328.19 million net outflow recorded in October.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the highest net foreign portfolio investment inflows in four months was largely brought about by the sharp decline in global crude oil prices, helping global and local inflation to ease further toward central banks’ targets.

Ricafort said easing inflation supports the interest rate hike pause by the US Federal Reserve and the BSP, both in anticipation of possible rate cuts in 2024.

Foreign portfolio investments 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.

For November alone, the net inflow of hot money jumped by 49.3 percent to $1.57 billion from $1.05 billion in the same month last year, ending two straight months of net outflows in September and October.

According to the BSP, about 71.4 percent of the total inflow or $1.1 billion went to peso government securities.

On the other hand, the remaining 28.6 percent or $450 million went to securities listed on the Philippine Stock Exchange particularly banks, holding firms, property, holding firms, transportation services and food.

About 92 percent of the total inflow last month came from the United Kingdom, Singapore, the US, Luxembourg and Hong Kong.

Likewise, the gross outflow of speculative funds surged by 59.4 percent to $902 million in November from $566 million in the same month last year.

The US, the central bank added, is still the top destination of outflows as it accounted for 58.6 percent or $529 million of the total amount pulled out from the Philippines.

Despite the strong inflow in November, the Philippines still yielded a net outflow of $42.13 million from January to November versus the net inflow of $793.75 million in the same period last year.

For the 11-month period, data showed gross inflows increased by five percent to $11.82 billion from $11.25 billion in the same period last year.

Likewise, gross outflows went up by 13.4 percent to $11.86 billion from a year-ago level of $10.46 billion.

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 pandemic.

The BSP further lowered its net hot money inflow projection to $1 billion from $2 billion for this year and to $1.7 billion from $3 billion for next year.

Ricafort said net foreign portfolio investments data could still improve in December amid the continued global and local financial market gains since November due to market expectations of a possible Fed rate cut as early as March next year.

“Foreign portfolio investments data could still improve amid hefty gains in the US financial markets amid markets pricing in possible Fed rate cuts in 2024 that could benefitlocal financial markets,” Ricafort said.