SHORT-TERM foreign investments contracted for a second straight month in January, the Bangko Sentral ng Pilipinas (BSP) reported late on Friday.
Foreign investments registered with the central bank through authorized agents — also known as “hot money” because these can be moved quickly elsewhere to maximize profits from interest rates — recorded a net outflow of $283.69 million.
It improved from December’s $487.37 million net outflow, but was significantly higher than the $75.83 million net outflow posted a year earlier.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the decline was mainly due to geopolitical worries that had triggered profit-taking in financial markets worldwide.
“The markets priced in possible higher US import tariffs, trade wars, and other protectionist policies that would lead to fewer Fed (Federal Reserve) rate cuts; slower global trade, investments, and overall global and local economic growth as a result,” he said.
Overall inflows for the month rose to $1.319 billion, 25.0 percent higher compared to the $1.055 billion recorded in December.
Gross outflows, on the other hand, totaled $1.602 billion, 3.9 percent up from prior month’s $1.542 billion.
The United States remained the main destination of the outflows, accounting for 34.9 percent or $559.27 million.
January’s hot money inflows mostly went to peso government securities (67.9 percent or $896.09 million), while the rest was invested in Philippine Stock Exchange-listed securities (32.1 percent or $422.93 million), particularly banks, transportation services, property, holding companies, and food, beverage, and tobacco firms.
The bulk of the short-term investments, or about 89.0 percent, came from the United Kingdom, Singapore, the United States, Ireland, and Luxembourg.
Year on year, inflows were 6.8 percent higher than the $1.24 billion recorded in January 2024, while outflows were up 22.2 percent from $1.31 billion.
Registration of inward foreign investments is optional under foreign exchange (FX) transaction rules. This is only mandatory if the investor is buying foreign currency from authorized agent banks for the repatriation of capital or remittances of investment earnings.
“Without such registration, the foreign investor can still repatriate capital and remit earnings on its investment, but the FX will have to be sourced outside the banking system,” the central bank said.
