More hot money leaves Philippines in January amid Trump protectionism

The United States accounts for nearly 35% of exiting foreign capital

MANILA, Philippines – More foreign capital left the Philippines in January for a second consecutive month amid continuous uncertainties in global trade, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Transactions on net portfolio investments registered with the monetary authority through authorized agent banks posted a net outflow of $283.69 million.

While this is 41.8% lower than the $487.37 million outflow in December, it is still triple the $75.8 million that left the Philippines in January 2024.

This is the second consecutive month that more net portfolio investments left the Philippines.

Foreign portfolio investments (FPIs) are also referred to as “hot money” since they enter and leave a country’s financial markets quicker than foreign direct investments. Examples of FPIs include securities at the Philippine Stock Exchange (PSE), as well as peso-denominated government bonds.

The United States accounted for $559.2 million or nearly 35% of exiting foreign capital in January.

On the other hand, 89% of FPI inflows came from the United Kingdom, Singapore, the US, Ireland and Luxembourg. Around 67% of the investments were made in government securities, while investments made through the PSE mostly went to banks, transportation services and property firms.

Rizal Commercial Banking Corporation’s chief economist Michael Ricafort attributed the net outflow to US President Donald Trump’s protectionist policies.

“Markets priced in possible higher US import tariffs, trade wars, and other protectionist policies that would lead to fewer Fed rate cuts, slower global trade, investments, and overall global and local economic growth as a result,” he explained.

Trump’s Commerce Secretary Howard Lutnick recently said the US will still impose tariffs on goods from Canada and Mexico, though the exact levels have yet to be set.

Some of the duties previously proposed include a 25% tariff on all imports from the two countries, as well as a 10% duty on all Chinese goods.

The Federal Reserve, the US’ central bank, paused cutting interest rates further in January to assess the economic impact of Trump 2.0 on the economy.

The BSP also followed in February by keeping the Philippines’ key interest rates steady at 5.75%, pending further assessment of Trump’s protectionist policies on the local economy. – Rappler.com