By Katherine K. Chan, Reporter
THE PHILIPPINES saw over $300 million in short-term foreign investments exit the country in August amid lingering global uncertainty and tighter local economic conditions, preliminary central bank data showed.
Transactions on foreign investments registered with the Bangko Sentral ng Pilipinas (BSP) through authorized agent banks yielded a net outflow of $315.41 million in August, according to data posted on its website.
This reversed the net inflows of $66.47 million recorded in July and $2.298 billion a year ago, marking the first time in three months that foreign portfolio investments (FPIs) posted a net outflow.
FPIs are also referred to as “hot money” due to the ease with which these flows enter or leave the country.
John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the FPIs’ reversal to net outflow came largely due to global volatility and domestic economic concerns weighing on investor sentiment.
“(It) reflects global risk aversion, geopolitical uncertainties, peso weakness, and domestic concerns over inflation and slower growth,” he said in a Viber message.
Persistent global uncertainty amid the ongoing Middle East war has strained investor confidence in the Philippines, with the economy slumping to a post-pandemic low growth of 2.3% in the second quarter.
Inflation likewise remained above the BSP’s 3% target for a sixth month in a row in August, although eased to a five-month low of 6.1%.
The peso, on the other hand, breached the P62-a-dollar handle versus the US dollar for the first time in late August, averaging 7.12% or P4.0756 weaker year on year at P61.3281 during the month.
However, Mr. Rivera noted that hot money flows often swing, with the latest reversal likely also reflecting FPIs’ inherent volatility.
“Portfolio outflows are inherently volatile and do not necessarily signal deteriorating long-term investment prospects,” he said.
Based on central bank data, the Philippines recorded $2.143 billion in gross hot money outflows in August, 14.01% higher than the $1.88 billion seen a year earlier.
Month on month, however, gross outflows fell by 6.86% from $2.301 billion.
Of the total, outflows from peso-denominated government securities hit $1.414 billion, while those from Philippine Stock Exchange (PSE)-listed securities stood at $729 million.
On the other hand, gross hot money inflows plunged by 56.26% to $1.828 billion during the month, from $4.178 billion in the same month last year.
It was also 22.8% lower than the $2.368-billion inflows logged in July.
BSP data showed that $1.351 billion of these inflows were channeled to peso government securities, while short-term foreign investments in PSE-listed securities reached $476 million.
The net outflow in August pushed the country’s eight-month hot money tally to a $4.254-billion net outflow, reversing the $4.583-billion net inflow seen in the comparable year-ago period.
Net outflows from government securities were at $2.276 billion during the eight-month period, with the rest or $1.981 billion recorded from PSE-listed securities.
Meanwhile, peso time deposits with at least a 90-day tenor posted a $3-million net inflow between January and August.
In the eight months to August, total FPI outflows ballooned by 54.55% year on year to $21.689 billion from $14.034 billion.
Meanwhile, gross inflows declined by an annual 6.35% to $17.436 billion as of August from $18.618 billion a year ago.
According to Mr. Rivera, persistent pressures, especially as the Middle East war drags on, could keep hot money flows volatile in the coming months.
“Flows may remain volatile amid elevated oil prices, forex (foreign exchange) pressures, and global uncertainties,” he said. “Improving inflation prospects, greater peso stability, and stronger investor confidence could encourage inflows to return.”
Based on the BSP’s projections as of the second quarter, hot money net inflows may fall to $1.8 billion by yearend from the $3.7-billion total estimated net inflows in 2025.