By Luisa Maria Jacinta C. Jocson, Journalist
A GREATER AMOUNT of short-term foreign investments entered the Philippines in November, according to data from the Bangko Sentral ng Pilipinas (BSP).
Records on foreign investments documented with the central bank via authorized banks showed a net inflow of $96.59 million, reversing the $529.68-million outflow reported in October.
Nevertheless, the net inflows have decreased by 85.6% compared to the $671.77-million inflow recorded the previous year.
These foreign portfolio investments are often referred to as “hot money” due to their rapid movement in and out of the economy.
Data from the BSP indicated that gross inflows soared by 18.2% to $1.86 billion in November from $1.57 billion during the same month last year.
For the month, the majority of investment inflows originated from the United Kingdom, Singapore, the United States, Luxembourg, and Norway. These nations represented 90% of foreign portfolio investment inflows.
A large portion (71.4%) of these investments was directed towards peso-denominated government securities, while the remaining (28.6%) was allocated to securities listed on the Philippine Stock Exchange, including those of banks; holding companies; real estate; transportation services; and food, beverage, and tobacco sectors.
Simultaneously, gross outflows of hot money nearly doubled to $1.76 billion in November from $903.1 million a year earlier.
“The US continues to be the primary destination for outflows, receiving $914.2 million (or 51.8%) of total outward remittances,” stated the central bank.
From January to November, foreign investments registered with the BSP resulted in a net inflow of $2.59 billion, contrasting with a net outflow of $43.66 million in the same period last year.
Gross net inflows reached $16.88 billion, while net outflows totaled $14.29 billion during the 11-month timeframe.
“The data showed improvement month-over-month following a reduction in tensions between Iran and Israel after Iran’s second missile strike on Israel this year on Oct. 1, though Israel has not retaliated thus far,” remarked Michael L. Ricafort, Chief Economist at Rizal Commercial Banking Corp.
However, he pointed out that various political happenings influenced markets during the month.
“The Trump factor remained a significant driver for both local and global markets in November, following Trump’s victory in the US presidential elections on Nov. 5,” Mr. Ricafort noted.
“Potential increases in US import tariffs and trade conflict could hinder global trade and economic growth, akin to the first Trump administration.”
Markets have been adjusting in anticipation of the impact of Mr. Trump’s proposed policies on the Philippines, which heavily depends on the United States for commercial and economic activities.
His proposals include raising import tariffs on Asian economies, along with stricter immigration regulations. The President-elect is expected to assume office on Jan. 20.
“Political disturbances locally since late October 2024 have also contributed to dampening market sentiment,” Mr. Ricafort added.
In the upcoming months, this could be counterbalanced by potential rate reductions from the BSP and the US Federal Reserve.
This year, the BSP has implemented a total of 75 basis points (bps) in rate cuts, bringing the benchmark rate to 5.75%.
BSP Governor Eli M. Remolona, Jr. has indicated further loosening but cautioned that implementing 100 bps in rate cuts in 2025 might be “excessive.”
The central bank is likely to continue reducing rates in “small increments” as it remains vigilant about potential upward pressures on inflation, the BSP chief noted.
Mr. Ricafort also highlighted the recent enhancement in the country’s credit rating outlook.
In late November, S&P Global Ratings confirmed the Philippines’ investment-grade rating on Tuesday and upgraded its outlook to “positive” from “stable,” signifying the economy’s strong growth potential.
The BSP anticipates foreign portfolio investments to yield a net inflow of $4.2 billion this year.
