Hot money outflows hit $205M in Dec. 2023

Foreign portfolio investments or hot money registered with the central bank through authorized agent banks recorded net outflows of USD205 million in December last year.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday showed that this resulted from the USD1.3 billion gross outflows and the USD1.1 billion gross inflows for the month.

The net outflow during the month was a turnaround from the USD92.9 million net inflow recorded in December 2022.

Foreign portfolio investments are also called hot money due to the speed with which it comes in and out of the economy.

The BSP said that of the USD1.1 billion registered investments in December, 52.9 percent or USD564 million were in Philippine Stock Exchange-listed securities, most of which were investments made in banks, holding firms, property, transportation services, and food, beverage and tobacco.

About 47.1 percent, meanwhile, were in peso government securities (GS) and the remaining were in other instruments.

Investments for the month mostly came from the United Kingdom, Singapore, United States, Luxembourg and Hongkong.

Data showed that of the USD1.3 billion gross outflows for the month, the United States received more than half or a total of USD677 million outward remittances.

For the entire 2023, hot money yielded net outflows of USD247 million, a reversal from the USD887 million net inflows noted for the same period last year in 2022.

The BSP said gross inflows amounted to USD12.9 billion, higher by 4.4 percent than the USD12.3 billion in 2022.

These investments were predominantly investments in PSE-listed securities (57.3 percent), peso GS (42.7 percent) and other investments.

The UK, US, Singapore, Luxembourg and Japan were the top five investor countries during the year.

Recorded outflows, meanwhile, amounted to USD13.1 billion.

The BSP said majority or 95.1 percent of these outflows represented capital repatriation, while the remaining 4.9 percent pertained to remittance of earnings.

The US continued to be the main destination of outflows with 63.6 percent of total.

“Hot money in December 2023 posted a net outflow of USD205 million amid some healthy profit-taking after hefty gains in the US financial markets from November-December 2023, similar to the healthy profit-taking pattern towards the end of the year as also seen a year ago, amid holiday mode in the latter part of December 2023,” Rizal Commercial Banking Corporation chief economist Michael Ricafort said in a comment.

Ricafort said some investors lock in gains before taking vacations amid many non-working holidays during the Christmas to New Year long weekends and also in preparation for the accounting year-end.

He said net foreign portfolio investments data could still improve in early 2024 amid the continued global and local financial market gains since November 2023.

Ricafort added “this is amid market expectations of a possible Fed(eral Reserve) rate cut as early as March or May 2024, as well as possible Fed rate cuts of more than 1.30 percentage points for 2024, which could be matched locally as a major leading indicator for the Philippine economy and financial markets for the coming months.” (PNA)

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