‘Hot money’ trickled back to local stock, bond markets in May

MANILA, Philippines — More flighty foreign funds entered the Philippines than those that left in May, halting two straight months of net outflows amid less hawkish signals from the Bangko Sentral ng Pilipinas (BSP) that fueled investors’ hopes of more relaxed financial conditions.

Data released on Friday by the BSP showed that foreign portfolio investments in the local stock and bond markets had yielded a net inflow of $43 million in May, a turnaround from two consecutive months of net outflows.

Also known as “hot money” because of their tendency to leave at the first sign of trouble, these funds are highly sensitive to developments onshore and offshore, unlike firmer commitments such as foreign direct investments, which tend to stay longer.

READ: PH saw $312-M net outflow of ‘hot money’ in April

A net outflow means more of these volatile foreign funds left the economy than those that entered during a period. Among the major domestic developments in May was the signal from the BSP that it may start cutting rates in August as inflation at home was expected to ease in the coming months.

Invested in listed firms, peso gov’t securities

Central bank data showed the May reading was enough to give the Philippines a year-to-date hot money net inflow of $108 million, a reversal from $805 million net outflows recorded in the same period in 2023.

The net inflow in May stemmed from $1.1 billion of fresh hot money that entered the country, up by 15.2 percent month-on-month.

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

The central bank said 65 percent of the gross inflows were invested in publicly listed companies while the remaining 35 percent were placed in peso government securities.

Investments in May mostly came from the United Kingdom, the United States, Singapore, Luxembourg, and Norway—with a combined share of 86.1 percent of the total.

Meanwhile, $1 billion in short-term foreign funds left in May, down by 17.6 percent.

The BSP is expecting $3.1 billion in hot money net inflow this year, larger than the $2.7 billion inflow in 2023. —Ian Nicolas P. Cigaral