Hot money shifts to net inflow in May

MANILA, Philippines — More short-term investments entered the Philippines in May as net inflow hit $42.86 million, reversing the $124.49 million outflow in the same month last year, the Bangko Sentral ng Pilipinas (BSP) said.

The net inflow in May was also a turnaround from the $312.18 million that left the country in April, ending two straight months of hot money outflows.

This has brought the five-month tally to a net inflow of $108.1 million, a reversal from the $794.18 million outflows in the same period last year.

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.

Based on preliminary data from the central bank, inflow of foreign portfolio investments through authorized agent banks rose by 24.5 percent to $1.05 billion in May from $844.72 in the same month a year ago.

Majority of registered investments or 65 percent were in securities listed in the Philippine Stock Exchange (PSE) particularly banks, holding firms, property, transportation services and mining.

A total of 35 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 Norway with combined share to total at 86.1 percent.

Meanwhile, gross outflows also increased by four percent to $1.01 billion from $969.21 million. The US received 57 percent of total outward remittances.

For the first five months of the year, gross inflows climbed by 34.2 percent to $6.16 billion from a year ago level of $4.59 billion. On the other hand, outflows increased by 12.4 percent to $6.05 billion during the five-month period from last year’s $5.38 billion.

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 BSP expects foreign portfolio investments to recover strongly with a net inflow of $3.1 billion for this year and $2.2 billion next year.