Hot money in net outflow territory of $103 million in July

Bangko Sentral ng Pilipinas Central Bank of the Philippines and Department of Finance central

SHORT-TERM investments made by foreign investors hit the net outflow territory for the third consecutive month in July, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.

Data from the Central Bank showed that foreign portfolio investments (FPI) recorded a net outflow of $103 million in July this year. The country’s FPI has been in the net outflow territory since May 2021.

The net outflow in July, however, is an improvement compared to the $342-million net outflows recorded in June 2022 and the net outflow of $339.7 million in July last year.

FPI are known as “hot” or “speculative” money because they are easily pulled in and out of the local platforms in the slight change of global and local sentiment.

July’s hot money numbers resulted from the $784-million gross outflows and $681-million gross inflows for the month.

Broken down, the $681-million total registered investments in July 2022 reflected a decrease of 34.5 percent compared to the $1 billion recorded in June 2022.

The BSP said 64.8 percent of investments registered were in listed securities, mainly in holding firms; food, beverage and tobacco; property; banks; and transportation services.

The remaining 35.2 percent, meanwhile, went to investments in Peso government securities.

Investments for the month mostly came from the United Kingdom; United States (US); Singapore; Hong Kong; and Luxembourg with a combined share to total at 84.7 percent.

On the other hand, the $784 million gross outflows for the month were lower by 43.2 percent than the $1.4 billion recorded in June 2022. The US received 66.1 percent of total outward remittances.

The July hot money net outflows brought the seven-month hot money flow of the country to a net inflow of $625 million, a turnaround from the $446 million net outflows noted for the same January to July period last year.

Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said recent local developments may spur positive sentiment of the global economy to invest in the country.

“Local market sentiment supported recently after President Marcos’ SONA covered a lot of economic-related priorities and reiterated Economic Team’s earlier signals especially economic growth targets and fiscal management,” Ricafort said.

“President Marcos also signaled no more lockdowns [that were costly for the government and reduced tax collections, widened budget deficits, ballooned the country’s debt since the pandemic started more than 2 years ago], thereby could help support faster economic growth, better debt management performance than otherwise; thereby leading to higher sales, earnings, and valuations for some listed companies,” he added.


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