Foreign portfolio investments registered a net inflow in August, marking the third straight month that foreign capital entered the country, the Bangko Sentral ng Pilipinas (BSP) said.
Transactions on short-term foreign investments registered with the BSP through authorized agent banks posted a net inflow of $153 million in August, a turnaround from the $86 million net outflows in the same month in 2022.
However, the net inflow in August was significantly smaller than the $962 million net inflow in July.
Foreign portfolio investments are commonly referred to as ‘hot money’ due to the ease with which these flows enter or leave the country.
Data from the BSP showed that gross inflows surged by 82% to $1.4 billion in August from the $792 million in the same month a year ago. Month on month, inflows went down by 8.6% from the $1.6 billion in July.
A bulk, or 74.2%, was invested in Philippine Stock Exchange-listed securities involved in banks, property, holding firms, food, beverage, tobacco, and transportation services. Meanwhile, about 25.8% was invested in peso government securities.
The majority, or 88.9%, of investments for the month came from Japan, the United Kingdom, the United States, Luxembourg, and Singapore.
On the other hand, gross outflows jumped by 46.6% to $1.3 billion in August from the $878 million in the same month in 2022. It also more than doubled (109.5%) from the $614 million in the previous month.
The central bank said that 59.2% of total outward remittances went to the United States.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the inflows were driven by market participants continuing to “hunt for bargains (and) opportunities for bottom-fishing.”
“Market sentiment (was) also supported after local policy rates were kept unchanged during the month despite the Fed rate hike on July 26,” he said in a Viber message.
Earlier this month, the BSP maintained key interest rates for a fourth straight meeting. The Monetary Board kept its policy rate at 6.25%, the highest it has been in nearly 16 years.
“The net easing trend in year-on-year inflation from the 14-year peak of 8.7% in January 2023 also supported market sentiment, though offset by higher prices of rice and petroleum that led to some pick up in headline inflation,” Mr. Ricafort added.
Headline inflation accelerated to 5.3% in August, ending six straight months of decline. This also marked the 17th consecutive month that inflation breached the 2-4% target.
The central bank expects inflation to average 5.8% this year.
For the first eight months of the year, BSP-registered foreign investments yielded a net inflow of $311 million, significantly lower than the $589-million net inflow in the same period last year.
Earlier this month, the BSP lowered its hot money net inflow projection for this year to $2 billion, down from the previous estimate of $2.5 billion. It also anticipates net inflows of $3 billion in 2024. — Luisa Maria Jacinta C. Jocson