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Hot money flees Philippines for second month in a row

More short-term foreign investments fled the Philippines for a second straight month in October amid uncertainty in global markets and lingering concerns over inflation.

Foreign portfolio investments (FPI) — commonly referred to as “hot money” due to the ease by which these flows enter or leave an economy — posted a net outflow of $221.11 million in October, based on data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday evening.

The October figure is 55% lower than the net outflow of $493.46 million a year earlier but more than nine times higher than the $24.16 million in net outflows seen in September.

This was also the biggest outflow since the $339.7 million posted in July.

In the ten months to October, hot money yielded a net outflow of $679.64 million, which was 83% lower than the $3.9 billion in net outflow logged in the same period in 2020.

In October alone, inflows declined by 30% to $949.58 million from $1.35 billion a year earlier and slipped by 20% from the $1.19 billion posted in August.

Meanwhile, gross outflows rose by 28% to $1.17 billion from the $913.49 million in the same month last year, but fell by 3.5% from $1.21 billion in the previous month.

The United Kingdom, United States (US), Hong Kong, Luxembourg and Switzerland were the top five investor countries in October, which accounted for 70.7% of total investments.

The bulk (95.6%) of investments went to securities listed at the Philippine Stock Exchange, mainly through investments in food, beverage and tobacco, property, banks, holding firms and information technology. The rest were invested in peso government securities.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in an email that net outflows were brought about by volatility in the global financial markets amid lingering inflation concerns.

These concerns were largely brought about by disruptions in the global supply chain, which had drove up prices of oil and other commodities around the world, he said.

Inflation eased to a three-month low of 4.6% in October, slower than the 4.8% in September but quicker than 2.5% a year earlier. This was the third straight month inflation exceeded the 2-4% target of the Bangko Sentral ng Pilipinas (BSP) for the year. Inflation has topped the BSP target this year except in July.

“Going forward, net foreign portfolio investments data could improve in the coming months amid additional measures to further re-open the economy towards greater normalcy that helps boost business/economic activities and investment valuations,” Mr. Ricafort said.

Net foreign portfolio investments could also improve amid more investment banking activities in the last two months of the year by both the national government and the private sector, he added.

BSP expects hot money to yield a net outflow of $4.3 billion this year. — Luz Wendy T. Noble and Jenina P. Ibanez

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