More ‘hot money’ enters in November

MANILA, Philippines — More speculative funds flowed into the Philippines, yielding a net inflow of $96.59 million in November and reversing the $529.68 million outflow seen a month ago, the Bangko Sentral ng Pilipinas (BSP) said.

However, the November figure was 85.6 percent lower than the $671.77 million inflows recorded in the same month last year.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the hot money data improved month-on-month after tensions eased between Iran and Israel.

This was after Iran’s second missile attack on Israel in October, with no retaliation from Israel so far.

Nonetheless, investors are concerned over possible protectionist policies in the United States, which could slow down global trade and economic growth.

This led to investors pulling out more funds from the Philippines, year-on-year, Ricafort said.

“Political noises locally since late October also partly weighed on market sentiment,” he said.

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.

In November, gross inflows rose by 18.2 percent to $1.86 billion compared to $1.57 billion in the same month in 2023. Month-on-month, it went up by 25.8 percent from $1.48 billion in October.

According to the central bank, 71.4 percent or $1.33 billion of registered investments went to peso government securities.

The remaining 28.6 percent or $531.71 million went to securities listed on the Philippine Stock Exchange (PSE), particularly banks, holding firms, property, transportation services as well as food, beverage and tobacco.

The BSP said 90 percent of the total came from the United Kingdom, Singapore, the US, Luxembourg and Norway.

On the other hand, gross outflows in November almost doubled to $1.76 billion from a year-ago level of $903.1 million. On a monthly basis, it declined by 12.2 percent from $2.01 billion.

The US was still the top destination of outflows, accounting for 51.8 percent or $914.2 million of the total amount pulled out of the Philippines.

From January to November, the Philippines recorded a net inflow of speculative funds amounting to $2.59 billion, reversing the $43.66 million net outflow recorded in the same period last year.

During the 11-month period, the gross inflow of foreign portfolio investments jumped by 42.8 percent to $16.88 billion from last year’s $11.82 billion.

Likewise, the gross outflow of speculative funds rose by 20.5 percent to $14.29 billion from $11.86 billion in the comparable year-ago period.

Last year, the Philippines missed its net inflow target of $1 billion as the net outflow of speculative funds amounted to $248.84 million. This was also a reversal from the $886.7 million net inflow in 2022.

The central bank expects foreign portfolio investments to bounce back strongly with a net inflow target of $4.2 billion for 2024 and $2.9 billion for 2025.