More ‘hot money’exits Philippines in January

March 3, 2025 | 12:00am

MANILA, Philippines — Foreign capital continued to exit the Philippines in January, marking the second consecutive month of net outflows amid persistent global economic uncertainties, according to data from the Bangko Sentral ng Pilipinas (BSP).

Foreign portfolio investments registered with the BSP through authorized agent banks recorded net outflows of $283.69 million in January, nearly four times higher than the $75.83 million outflows recorded in the same month in 2024.

Despite this sharp year-on-year increase, January’s outflows were 42 percent lower than the $487.37 million recorded in December.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., attributed the sustained capital flight to market jitters over the “Trump factor.”

He said that following US President Donald Trump’s inauguration in January, investors have been pricing in the possibility of higher US import tariffs, trade tensions and protectionist policies.

These factors could lead to fewer US Federal Reserve rate cuts, slower global trade, weaker investments and subdued economic growth both globally and locally.

Foreign portfolio investments are also known as hot money or speculative funds, as these flow regularly between financial markets when investors try to ensure they get the highest short-term interest rates possible.

Based on BSP data, gross inflows inched up by 6.8 percent to $1.31 billion in January from a year-ago level of $1.24 billion. It was also 25 percent higher than the $1.06 billion in December 2024.

More than half or 67.9 percent of the total inflow went to peso government securities while 32.1 percent went to securities listed on the Philippine Stock Exchange, particularly banks, transportation services, property, holding firms as well as the food, beverage and tobacco sectors.

The primary sources of these investments were the UK, Singapore, the US, Ireland and Luxembourg, which collectively accounted for 89 percent of the total.

Meanwhile, net outflows surged by 22.2 percent to $1.6 billion in January from $1.31 billion in the same month in 2024.

On a monthly basis, outflows went up by 3.9 percent from $1.54 billion.

The US remained as the top destination of outflows, accounting for 34.9 percent of the total amount pulled out from the Philippines.

Ricafort said in the coming months, foreign portfolio investments in the Philippines remain hinged on policy rate cuts from the US Fed and the BSP.