More hot money flees Philippines in August

MANILA, Philippines — More speculative funds flowed out of the Philippines than what came in for the fourth straight month in August, with foreign portfolio investments yielding a net outflow, according to the Bangko Sentral ng Pilipinas (BSP).

Data released by the central bank showed that total foreign investments registered through authorized agent banks registered a net outflow amounting to $86.29 million in August, reversing the $11.51 million net inflow registered in the same period last year.

Foreign investments registered by the BSP through authorized agent banks are also known as hot money or speculative funds since these flow regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible.

The Philippines has been booking net outflows of foreign portfolio investments for the past four months, with $270.42 million posted in May, $342.19 million in June, $103.14 million in July and $86.29 million in August.

For August, gross outflows of speculative funds grew by 10.3 percent to $877.88 million from $795.48 million in the same month last year.

On the other hand, gross inflows coming mainly from the United Kingdom, the US, Hong Kong, Malaysia and Luxembourg slipped by 1.9 percent to $791.59 million from $806.99 million.

Data showed the majority of the inflows at 76 percent were invested in securities listed on the Philippine Stock Exchange (PSE), particularly in banks, holding firms, property, food, beverage and tobacco, as well as electricity, energy, power and water.

About 24 percent went to investments in peso government securities, while less than one percent went to other instruments.

Despite the net outflows for three consecutive months, the Philippines managed to book a net inflow amounting to $538.55 million from January to August this year, reversing the $434.37 million net outflow recorded in the same period last year.

For the eight-month period, gross inflows slipped by 2.9 percent to $8.61 billion compared to $8.86 billion in the same period last year, while gross outflows of speculative funds decreased by 13.2 percent to $8.07 billion from $9.3 billion.

Last year, the Philippines missed its net inflow target of $1.5 billion as it registered a net outflow of speculative funds amounting to $574.46 million, 86.4 percent lower than the $4.24 billion net outflow recorded during the height of the COVID-19 pandemic in 2020.

The central bank expects foreign portfolio investments bouncing back strongly with a net inflow of $4.5 billion for 2022 and $6.7 billion for 2023.