‘Hot money’ flows turn negative in Feb

SHORT-TERM foreign investments turned negative in February as outflows substantially outpaced inflows, the Bangko Sentral ng Pilipinas (BSP) reported late on Thursday.

Transactions registered with the BSP through authorized agent banks (AABs) saw inflows of just $680 million versus outflows totaling $1.2 billion.

The resulting net outflow of $531 million, the central bank said, was a “turnaround compared to the net inflows recorded in January 2023 at $292 million.”

Inflows of so-called hot money — investors move the funds in and out of an economy to make short-term profits — were down 32.3 percent from January’s $1 billion, while outflows rose by 70.2 percent from $712 million.

The bulk of the investments, or 79.6 percent, went to Philippine Stock Exchange-listed securities — mainly banks; holding firms; property; food, beverage and tobacco; and electricity, energy, power and water — while the rest was invested in peso government securities (20.4 percent) and in other instruments (less than 1.0 percent).

The funds mostly came from the United Kingdom, the United States, Luxembourg, Hong Kong and Singapore with a combined share of 82.5 percent.

Most (67.3 percent) of the outflows, meanwhile, went to the US.

Year on year, inflows fell by 28.0 percent in February from $945 million 12 months earlier, while outflows were larger by 80.7 percent compared to February 2021’s $670 million.

The net result was again a reversal from the $274-million net inflow recorded a year ago.

Year-to-date investment flows also turned negative following February’s results. The net outflow of $239 billion was “a turnaround from the $289-million net inflows noted for the same period last year,” the BSP said.

As of March 3, the net outflow had widened to $353.77 million, central bank data showed, with year-to-date inflows at $1.928 billion and outflows at $2.282 billion.

The BSP figures account for funds received by AABs. Registration is only required if the investor or its representative purchase foreign exchange from AABs or their subsidiaries/affiliates for the repatriation of capital and remittance of earnings that accrue on the registered investment.

“Without such registration, the foreign investor can still repatriate capital and remit earnings on its investment but the FX (foreign exchange) will have to be sourced outside the banking system,” the central bank added.