Sunday, April 14, 2024

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In August, there was a net inflow of $153 million in hot money posts.


The Bangko Sentral ng Pilipinas (BSP) reported that in August, foreign portfolio investments had a positive balance, continuing the trend of foreign capital entering the country for the past three months.

In August of 2022, the net inflow of short-term foreign investments registered with the BSP through authorized agent banks was $153 million. This marks a change from the net outflow of $86 million in the same month of the previous year.

The net inflow for August was considerably less than the net inflow of $962 million in July.

International investors often call foreign portfolio investments “hot money” because they can easily move in and out of a country.

According to BSP data, there was a significant increase of 82% in gross inflows to $1.4 billion in August compared to $792 million in the same month last year. However, inflows decreased by 8.6% from July’s $1.6 billion.

The majority, specifically 74.2%, was put into securities listed on the Philippine Stock Exchange, including those in the banking, real estate, holding company, food and beverage, tobacco, and transportation industries. The remaining 25.8% was invested in government securities in pesos.

During the month, a significant 88.9% of investments originated from Japan, the United Kingdom, the United States, Luxembourg, and Singapore.

Conversely, there was a 46.6% increase in gross outflows in August, reaching $1.3 billion compared to the $878 million in the same month of 2022. This also more than doubled (109.5%) from the previous month’s total of $614 million.

The central bank reported that 59.2% of all outward remittances were sent to the United States.

According to Michael L. Ricafort, the Chief Economist of Rizal Commercial Banking Corp., the increase in funds was due to market participants actively seeking out discounted investments and taking advantage of opportunities for profitable purchases.

He stated in a Viber message that market sentiment was bolstered by the decision to maintain local policy rates unchanged, despite the Federal Reserve’s increase on July 26.

In the beginning of this month, the BSP decided to keep key interest rates unchanged for the fourth consecutive meeting. The Monetary Board chose to maintain its policy rate at 6.25%, which is the highest it has been in almost 16 years.

Mr. Ricafort stated that while there was an increase in the prices of rice and petroleum, which caused some rise in overall inflation, the market sentiment was still positively influenced by the decrease in year-on-year inflation from a peak of 8.7% in January 2023.

In August, the overall increase in prices increased to 5.3%, breaking a six-month streak of decreases. This also indicates that inflation has surpassed the desired range of 2-4% for the 17th month in a row.

The main bank predicts that inflation will have an average of 5.8% in the current year.

From January to August, foreign investments registered with the BSP resulted in a net inflow of $311 million, which is considerably lower than the $589-million net inflow during the same period in the previous year.

The BSP has revised its forecast for hot money net inflow this year to $2 billion, a decrease from the previous estimate of $2.5 billion. It expects net inflows of $3 billion in 2024. – Luisa Maria Jacinta C. Jocson