Hot money outflows rise to $236 million in March

By means of Luisa Maria Jacinta C. Jocson, News reporter

MORE FOREIGN PORTFOLIO investments left the Philippines in March, when investors expected a slowdown in interest rate cuts by the US Federal Reserve, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Transactions on foreign investments registered with the central bank through a recognized agent banks recorded a net issueFlow of $236.02 million in March, signiFsignificantly higher than the $70.26 million figureFlows in the same month a year ago.

This was also a reversal from the net inflows of $689.27 million recorded in February.

Foreign portfolio investments are called “hot money” because of the ease with which they can enter or leave a jurisdiction, unlike foreign direct investments, which are considered less important. Fannoys.

Central bank data showed this was a gross profitFLows for the month nearly doubled (91.4%) to $1.6 billion, compared to $859.07 million in February.

Year over year, gross outflows increased 24% from $1.3 billion outflow in March 2023.

The US received more than half (53.9%) of total outward remittances, amounting to $887 million.

Meanwhile, gross inflows fell 9.1% to $1.4 billion in March, compared to $1.5 billion in the previous month. On the other hand, it rose 12.1% from $1.25 billion in the same period a year ago.

The majority of investments (56.7%) went to securities listed on the Philippine stock exchange, mainly banks Fproperty, property, transport services and food, drink and tobacco.

The remaining 43.3% of the inFlows went to investments in peso government bonds and other instruments.

In March, investments came mainly from the United Kingdom, Singapore, the United States, Switzerland and Luxembourg, which accounted for 83.6% of total investments. totally foreign inFlows.

In the first quarter, hot money generated a net profitFlow of $377.42 million, a turnaround from net spend of $328.2 millionFlow a year ago.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said more short-term foreign capital left the country in March as investors anticipated a slowdown in Fed rate cuts.

Fed policymakers have been sending more hawkish signals due to stubborn US yieldsFand the interest rate cuts are postponed until the end of September.

“In the coming months, both the US and the local population will take actionFIf rates were to move closer to the central bank’s targets, it could lead to a possible cut in Fed and local policy rates later in 2024, leading to further gains in yields. Ffinancial markets and support further improvement of foreign portfolio investments,” said Mr Ricafort.

BSP Governor Eli M. Remolona Jr. previously said the central bank could cut interest rates by the fourth quarter. However, this could be postponed until the first quarter of 2025Frisks remain.

At its policy meeting last month, the Monetary Board held firm for the fourth time in a row, leaving the benchmark interest rate at a nearly 17-year high of 6.5%.

From May 2022 to October 2023, the BSP did just that increased financing costs by 450 basis points.

Mr Ricafort said better-than-expected gross domestic product (GDP) growth would also support investment.

Secretary of the Treasury Ralph G. Recto-oorLier said the growth in the first quarter can range from 5.8-6.3%. The government is targeting growth of 6 to 7% this year.

First quarter GDP data will be released by the local statistical authority on May 9.

The BSP expects foreign portfolio investments to end the year at a net amount of $1.3 billionFlow.