Hot money inflows hit $170M in June

By Katherine K. Chan, Reporter

NET FOREIGN portfolio investment inflows into the Philippines extended to a second straight month in June as investor activity improved despite lingering financial market volatility, according to Bangko Sentral ng Pilipinas (BSP) data.

Transactions on foreign investments registered with the central bank through authorized banks posted a net inflow of $170.12 million in June, lower than the $232.46-million inflows in May but exceeded the $18.34 million seen a year ago.

This was the second straight month that the country saw a net inflow in short-term foreign investments.

Foreign portfolio investments (FPI) are also referred to as “hot money” due to the ease with which these flows enter or leave the country.

Investors’ sustained interest in emerging market assets, confidence in the Philippines’ macroeconomic fundamentals, as well as the attractiveness of domestic financial instruments likely led to the back-to-back hot money net inflow, Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said.

“The positive net inflow recorded in June suggests that foreign investors remained interested in Philippine financial assets despite heightened global uncertainty,” he said via Viber.

“While net inflows eased to $170.12 million from $232.46 million in May, the fact that inflows exceeded outflows for a second consecutive month indicates that the Philippines continued to attract foreign portfolio investments on balance.”

Based on central bank data posted on its website, gross inflows jumped by 51.52% to a four-month high of $2.942 billion in June from $1.942 billion in the previous year.

Month on month, it surged by 69.4% from $1.737 billion.

“The substantial increase in gross inflows to $2.94 billion, the highest level in four months, also points to sustained foreign participation in local markets even as investors navigated a volatile global environment,” Mr. Asuncion said.

Meanwhile, gross outflows of hot money soared by 44.13% year on year to $2.772 billion in June from $1.924 billion. It also ballooned by 84.26% from the $1.504-billion outflows a month earlier.

Mr. Asuncion said the rise in outflows reflected investors’ cautious stance and need to rebalance their portfolio amid challenging and uncertain economic global conditions.

Most or $540 million of the net inflows were recorded in investments in peso-denominated government securities, larger than the $410-billion net inflow in June last year.

BSP data also showed net outflows of investments in Philippine Stock Exchange-listed securities slightly narrowed to $370 million in June from $392 million in the previous year.

FIRST-HALF FLOWS
In the first half of the year, the country’s total hot money net outflow stood at $4.005 million, a reversal from the $1.542-million hot money that flowed into the country at end-June last year.

“The first-half outflow was driven more by global uncertainty than by the Philippine economy itself,” SM Investments Corp. Vice-President and Group Economist Robert Dan J. Roces said in a Viber message.

“Many investors simply chose to keep more money in US dollar assets while markets were dealing with higher oil prices and geopolitical risks.”

During the six-month period, inflows went up by an annual 10.63% to $13.241 billion from $11.969 billion.

Meanwhile, total gross outflows surged by 65.39% to $17.245 billion in the period ending July from $10.427 billion in the prior year.

Mr. Asuncion noted that hot money flows would depend on geopolitical developments.

“Looking ahead, we expect portfolio flows to remain sensitive to developments in the global financial environment, particularly movements in interest rates, geopolitical risks, and investor risk appetite,” he said.

The BSP expects FPIs to end this year at a net inflow of $1.8 billion, lower than the $3.7-billion total estimated net inflows in 2025.