‘Hot money’ snaps 3-month net inflow streak

MANILA  -More flighty foreign funds left the country against those that entered in September, snapping three straight months of net inflows amid investor unease over the conflict in the Middle East and resurgent inflation at home.

Foreign portfolio investments recorded net outflows of $698 million, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.

Also known as “hot money” because of their volatile nature, foreign portfolio investments are highly sensitive to developments at home and abroad unlike firmer commitments like foreign direct investments.

A net outflow means more short-term foreign funds exited during a period compared to those that entered, while a net inflow occurs when the reverse happens.

The BSP expects to close 2023 with a $2-billion hot money net inflow, lower than its previous projection of $2.5 billion net inflows, as a high interest rate environment impedes investment decisions.

Data showed September’s outflow broke three consecutive months of net inflows. Year-to-date, hot money registered a net outflow of $387 million, a turnaround from $222 million net inflows posted in the same period last year.

High inflation, Israel-Hamas clash

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said a stubbornly high domestic inflation rate and the Israel-Hamas clash, which could stoke oil prices, frayed investor nerves during the month.

READ: PH inflation rose to 6.1% in Sept as food prices, transport cost soared

“For the coming months, the Israel-Hamas war since October 7 added to global market volatility and could weigh on the net foreign portfolio investments data,” Ricafort said.

Broken down, short-term funds amounting to $1.6 billion left the country in September, with the US receiving most of the outward remittances looking for safe havens.

That was bigger compared to the $888 million gross inflows in September, which was down by 38.4 percent from the previous month.

Figures showed 52.1 percent of registered investments last month went to publicly-listed companies while the remaining, or 47.9 percent, went to government securities like Treasury bonds and Treasury bills. Investments for the month mostly came from the United Kingdom, Singapore, the US, Luxembourg and Switzerland with combined share to total at 88.5 percent.