Israel-Hamas conflict fuels exit of ‘hot money’ from PH

MANILA  -The traffic of short-term investments or “hot money” registered with the Bangko Sentral ng Pilipinas showed net outflows for the second month in a row at $328 million in October, partly due to volatility sparked by the Israel-Hamas conflict that month. This was the biggest in more than three years or since May 2020.

The readout for October was less than half the $698 million outflows recorded a month earlier in September, but a reversal from the monthly net inflows of $83 million seen a year ago.

Gross inflows in October were pegged at $1.3 billion or 19 percent lower than September’s $1.6 billion, but 129 percent higher than last year’s $561 million.

About three-fifths or 60.5 percent of gross inflows in October was invested into companies that trade shares on the Philippine Stock Exchange, such as those that are engaged in banks; property; operating as holding firms; casinos and gaming; and food, beverage and tobacco.

Meanwhile, about 40 percent was invested in peso-denominated government securities and other financial instruments.

About 88 percent of the inbound capital came from the United Kingdom, United States, Luxembourg, Singapore, and Hong Kong.

At the same time, a total of $954 million flowed out of the country in October, rising by 7.5 percent from $888 million in gross outflows a month earlier and 48 percent higher than $645 million a year earlier.

More than three-fifths or 62 percent of the gross outflows went to the United States.

From January to October, traffic of hot money showed net outflows of $715 million, a turnaround from $305 million of net inflows recorded for the same period last year.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the Israel-Hamas war led to some volatility in the [global and local] financial markets. Ricafort also noted some flight to the safest havens as a matter of prudence during geopolitical uncertainties, as well as still relatively higher inflation.

He said that in the coming months, net foreign portfolio investments could improve after the better-than-expected data on the growth of Philippine gross domestic product and inflation data.