January net inflow of hot money lowest in 5 months

The Philippines posted the smallest net inflow of foreign portfolio investments in five months in January, as a surge in coronavirus disease 2019 (COVID-19) infections dampened sentiment.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday evening showed hot money registered a net inflow of $14.6 million in January, 85% lower than the $97.92 million in net inflow in the same month in 2021.

However, it was a turnaround from the $4.38 million in net outflow seen in December.
The net inflow of speculative funds in January was also the smallest since the $11.51 million in August.

The Philippine capital and other areas saw a return to a stricter Alert Level 3 in January amid a spike in COVID-19 cases fueled by the more transmissible Omicron variant.

Gross inflows during the month reached $731.42 million, down by 23% from the $951.61 million in January 2020 and by 45% the $1.331 billion in December.

Meanwhile, gross outflows decreased by 16% to $716.82 million from $853.7 million a year earlier. It was also a 46% drop from the $1.336 billion in December.

More than two-thirds or 68% of the investments went to securities of holding firms; property; banks; food, beverage and tobacco; and telecommunications. The rest were channeled into peso government securities.

The United Kingdom, United States, Luxembourg, Switzerland and Malaysia were the top five investor countries during the month with combined share to total at 82%.

The ongoing geopolitical tensions in Europe could impact investor sentiment and affect foreign portfolio investments in the coming weeks, an analyst said.

“Hot money inflow will depend on our exposure to the ongoing crisis in Eastern Europe. It would depend on the move of our neighboring countries supporting or condemning the attacks. The situation remains to be fluid and countries are waiting for other countries’ move,” Asian Institute of Management economist John Paolo R. Rivera said.

Russia began an all-out invasion of Ukraine on Thursday, prompting the West to impose sanctions against Moscow.

Hot money is expected to yield a $5.7-billion net inflow this year, based on BSP projections. It posted a $573.36-million net outflow in 2021.