More hot money entered Philippines in September

MANILA, Philippines —  More speculative funds entered the Philippines in September, marking the third straight month of net inflow, amid continued appetite among foreign investors, according to the Bangko Sentral ng Pilipinas (BSP).

Data released by the BSP showed the net inflow of foreign investments registered with the central bank through authorized agent banks amounted to $1.03 billion in September, reversing the $698.01 million net outflow recorded a year ago.

In September, gross inflows more than doubled to $2.53 billion from $887.61 million in the same month last year. On the other hand, gross outflows slipped by five percent to $1.51 billion from a year-ago level of $1.59 billion.

Foreign portfolio investments are also known as hot money or speculative funds as these flow regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible.

According to the BSP, about 57.5 percent of the inflows, or $1.46 billion, went to peso government securities.

The balance of $1.08 billion, or 42.5 percent, went to securities listed on the Philippine Stock Exchange, particularly banks, holding firms, property, transportation services as well as food, beverage and tobacco.

The central bank said about 88.4 percent of the total inflows came from the United Kingdom, Singapore, the US, Luxembourg and Malaysia.

Meanwhile, the United States remained the top destination of outflows, accounting for 51.1 percent or $769.93 million of the total amount pulled out of the country.

From January to September, the net inflow of speculative funds stood at $3.02 billion, significantly higher than the $387.24 million in the same period last year.

Michael Ricafort, chief economist of the Rizal Commercial Banking Corp., said investor sentiment was boosted by the BSP’s interest rate cut in August, the reduction in banks’ reserve requirements and the US Federal Reserve’s 50-basis-point cut in September.

He said interest rate cuts and lower reserve requirements benefit financial markets, particularly bonds and stocks.

Ricafort said these measures also stimulate the broader economy by lowering borrowing costs, which drive demand for loans, boost investments, create jobs, enhance global trade and support business growth.

Last year, the Philippines missed its net inflow target of $1 billion as the net outflow of speculative funds amounted to $248.84 million. This was also a reversal of the $886.7 million net inflow in 2022.

The central bank expects foreign portfolio investments to bounce back strongly this year, with a net inflow target of $4.2 billion for 2024 and $2.9 billion for 2025.