Hot money outflows totaled $27 million in June

MORE short-term foreign investments flowed out of the Philippines in June, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Foreign investment transactions registered with the central bank through authorized banks generated a net outflow of $27.26 million.

This was a reversal of net inflows of $42.86 million in May, as well as inflows of $280,000 a year ago.

These foreign portfolio investments are also called “hot money” because of the ease with which these funds enter and leave the economy

BSP data shows gross hot money outflows rose 20.3% to $1.07 billion in June, up from $889.16 million a year earlier.

“The United States remains the main destination for outflows, receiving $597 million (or 55.8%) of total outward remittances,” the report said.

Meanwhile, gross inflows rose 17.2% to $1.04 billion in June, compared to $889.44 million a year ago.

The five largest investor economies during the month were the United Kingdom, the United States, Singapore, Luxembourg and Switzerland, accounting for 86.9% of foreign portfolio investments inFlows.

The majority of investments went into peso government bonds (52.8%), while the remainder was invested in Philippine stock exchange-listed securities of holding companies; banks; transportation services; property; and electricity, energy, power and water.

“The (peso) was the weakest in June and this signals the flight to safety of foreign investment,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said in a Viber message.

The peso fell to P58.86 against the dollar in June, its worst performance in 20 months. This was also its weakest finish yet since it dropped to the P58 level in May.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., also noted that foreign portfolio investment plungedFlow in June as recent geopolitical tensions increased market volatility.

He cited heightened tensions between the Philippines and China over the disputed waters, and the scam between Israel and HamasFcrime, among other things.

“Risk factors that still contributed to the net foreign sell-off/sell-offFRecent lows include the El Niño drought, which led to higher local rice prices and a weaker peso exchange rate, which led to a slight increase in inflation,” Mr. Ricafort added.

In the first half of the year, BSP-recorded foreign investments generated net inflows of $80.84 million, a reversal from the $804.28 million outflows recorded in the same period in 2023.

Broken down, gross net inflows were $7.2 billion, while net outflows in the January-June period were $7.12 billion.

“While monthly fluctuations persist, the overall trend indicates improved investor sentiment toward the Philippine economy,” Security Bank Corp. Chief Economist Robert Dan J. Roces said. in a Viber message.

The BSP expects foreign portfolio investments to generate net inflows of $3.1 billion by 2024. Luisa Maria Jacinta C. Jocson