By Katherine K. Chan, Reporter
THE PHILIPPINES continued to see short-term foreign investments exiting the country for a second straight month in April as investors remained cautious amid heightened global uncertainty, preliminary central bank data showed.
Transactions on foreign investments registered with the Bangko Sentral ng Pilipinas (BSP) through authorized agent banks yielded a net outflow of $1.601 billion in April, a reversal of the $857.12-million net inflow a year earlier.
However, this was lower than the $1.957-billion net outflow posted in March.
Foreign portfolio investments (FPI) are also referred to as “hot money” due to the ease with which these flows enter or leave the country.
Based on central bank data posted on its website, gross outflows of hot money ballooned by 89.63% year on year to $3.108 billion in April from $1.639 billion. However, it was 17.78% lower than the $3.78-billion outflows in the previous month.
On the other hand, total hot money inflows amounted to $1.507 billion during the month, down by 39.62% from $2.496 billion a year prior and by 17.33% from $1.823 billion in March.
Most or $1.056 billion of the outflows were recorded in investments in peso-denominated government securities, reversing from the $1.142-billion net inflow in April last year.
Meanwhile, investments in Philippine Stock Exchange (PSE)-listed securities saw a net outflow of $545 million, larger than the $284-million outflow a year ago.
More short-term foreign investments left the country in April as uncertainties stemming from global geopolitical tensions prompted investors to be more cautious, analysts said.
“April’s net outflow came as investors turned more cautious amid geopolitical tensions, a strong dollar, and uncertainty over global interest rates,” SM Investments Corp. (SMIC) Group Economist Robert Dan J. Roces said in a Viber message.
“Foreign funds tend to move quickly when risk sentiment shifts, and that’s what we saw,” he added.
The ongoing war in the Middle East, which erupted in late February, also continued to jolt domestic and global markets, which likely led to two straight months of hot money outflows, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted.
“This is largely due to the second full month of the war on Iran/Middle East since Feb. 28 that increased global and local market volatility amid the sharp increase in global crude oil, fuel, and petroleum prices, higher inflation, and possible further central bank rate hikes,” he said via Viber.
Uncertainties surrounding the over three-month conflict between the United States and Iran continue to fuel market volatility, pushing up inflation for major oil importers and weighing on currencies like the Philippine peso as the US dollar strengthens on safe-haven demand.
In April, Philippine inflation quickened to its fastest pace in over three years at 7.2% from 4.1% in March as still high oil prices spilled over to costs of food and utilities.
Meanwhile, the peso touched the P61 mark for the first time in April, plunging by 73.7 centavos to close at P61.485 against the greenback on April 30 from its P60.748 finish on March 31.
The BSP has since shifted to a hawkish stance, with growing calls for further rate hikes to temper spiraling prices.
The Monetary Board tightened for the first time in two-and-a-half years at its April meeting, raising the key policy rate by 25 basis points (bps) to 4.5%.
BSP Governor Eli M. Remolona, Jr. has said that they may keep using monetary policy to bring inflation back to their 2%-4% target, with an off-cycle hike being considered before the Board’s next review on June 18.
April’s net outflow brought the country’s four-month hot money tally to a $4.407-billion net outflow. This likewise marked a reversal from the $923-million short-term foreign investments that entered the country in the same period last year.
Broken down, foreign investments in government securities posted a net outflow of $3.072 billion in the January-to-April period, reversing the $1.68-billion inflows seen a year prior.
Meanwhile, hot money outflows in PSE-listed securities stood at $1.34 billion as of April, much higher than the $755-million outflows recorded in the previous year.
“In the coming months, flows may remain choppy, with periods of both inflows and outflows, depending on how global markets, the Fed, and the peso evolve,” said SMIC’s Mr. Roces.
The BSP projects FPIs to end this year at a net inflow of $3.7 billion, unchanged from the total estimated net inflows in 2025.
