Hot money outflows hit $27M in June
MORE SHORT-TERM foreign investments flowed out of the Philippines in June, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Transactions on foreign investments registered with the central bank through authorized banks posted a net outflow of $27.26 million.
This was a reversal of the $42.86-million net inflow in May, as well as the $280,000 inflow a year ago.
These foreign portfolio investments are also called “hot money” due to the ease by which these funds enter and leave the economy
BSP data showed gross outflows of hot money jumped by 20.3% to $1.07 billion in June from $889.16 million a year earlier.
“The United States remains to be the top destination of outflows, receiving $597 million (or 55.8%) of total outward remittances,” it said.
Meanwhile, gross inflows climbed by 17.2% to $1.04 billion in June from $889.44 million a year ago.
The top five investor economies during the month were the United Kingdom, the United States, Singapore, Luxembourg and Switzerland, accounting for 86.9% of foreign portfolio investment inflows.
Most of the investments went to peso government securities (52.8%), while the rest were invested in Philippine Stock Exchange-listed securities of holding firms; banks; transportation services; property; and electricity, energy, power and water.
“The (peso) was the weakest this June and this signals the flight-to-safety of foreign investments,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said in a Viber message.
The peso fell to as low as P58.86 against the dollar in June, its worst showing in 20 months. This was also its weakest finish so far since it sank to the P58 level in May.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also noted that foreign portfolio investments swung to an outflow in June as recent geopolitical tensions increased volatility in the markets.
He cited heightened tensions between the Philippines and China over contested waters, and the Israel-Hamas conflict, among others.
“Risk factors that still contributed to the net foreign selling/outflows recently include the El Niño drought that led to higher local rice prices and weaker peso exchange rate that led to some pickup in inflation,” Mr. Ricafort added.
In the first half of the year, BSP-registered foreign investments yielded a net inflow of $80.84 million, a turnaround from the $804.28-million outflow in the same period in 2023.
Broken down, gross net inflows stood at $7.2 billion, while net outflows amounted to $7.12 billion in the January-June period.
“While monthly fluctuations persist, the overall trend suggests improved investor sentiment towards the Philippine economy,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.
The BSP expects foreign portfolio investments to yield a net inflow of $3.1 billion in 2024. — Luisa Maria Jacinta C. Jocson