Hot money outflows registered in January

The Bangko Sentral ng Pilipinas (BSP) said foreign portfolio investments in January registered a net outflow of $283.69 million, higher than the same period last year of $75.83 million, according to a report by Manila Bulletin.

Net “hot money” outflows were lower compared to December 2024’s $487.37 million withdrawals, based on BSP data.

Hot money investments are inward foreign investments registered with BSP’s authorized agent banks (AABs). These include publicly listed securities, peso-denominated government securities, peso time deposits with banks with a minimum tenor of 90 days, other peso debt instruments, unit investment trust funds, and other instruments such as exchange-traded funds (ETFs) and Philippine Depositary Receipts.

In January, gross inflows totaled $1.319 billion, while gross outflows amounted to $1.602 billion. These are higher than the previous year’s $1.235 billion gross inflows and $1.311 billion gross outflows.

Foreign portfolio investments mostly came from investors from the United Kingdom, Singapore, the US, Ireland, and Luxembourg. These five countries accounted for 89 percent of total gross inflows.

Meanwhile, the US is still the top destination for outflows with 34.9 percent or $559.27 million.

The BSP said 67.9 percent or $896.09 million of the speculative hot money was invested in peso government securities in January, while 32.1 percent or $422.93 million was in listed securities at the Philippine Stock Exchange (PSE).

“The majority of investments in PSE-listed securities were made in banks, transportation services, property, holding firms, and the food, beverage, and tobacco sectors,” noted the BSP.

Last year, net hot money inflows reached $2.103 billion, reversing the $248.84 million net outflows in 2023, but it is way below the BSP target of $6.3 billion for 2024.

The BSP-registered foreign portfolio funds include money market instruments that are tradable in the market. They are referred to as hot money because of their short-term nature.

For 2025, the BSP forecasts net hot money will reach $3.1 billion inflows amid the moderating global inflation and improved business activity, despite US-related policy uncertainty.

It is optional for AABs to register inward foreign investments with the BSP. It is required only if the investor or its representative will purchase foreign currency from these banks or their subsidiary and affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment.

Without such registration, the foreign investor can still repatriate capital and remit earnings on its investment, but the foreign exchange will have to be sourced outside the banking system.