By Katherine K. Chan, A reporter
PHILIPPINES continue to see short-term foreign investment flow out of the country to a for the second month in a row in April as investors remained cautious amid rising global uncernegative, the first central bank data is shown.
Foreign investment transactions registered with the Bangko Sentral ng Pilipinas (BSP) through authorized agent banks totaled P1.601 billion in April, a reversal of the net inflow of $857.12-million last year.
However, this was below the $1.957-billion net outflow posted in March.
Foreign portfolio investment (FPI) is also called “hot money” because of the ease with which it flows into or out of the country.
Based on central bank data posted on its website, net outflows ballooned 89.63% year-on-year to $3.108 billion in April from $1.639 billion. However, it was 17.78% lower than last month’s outflow of 3.78 billion.
On the other hand, total cash flow reached $1.507 billion during the month, down 39.62% from $2.496 billion last year and 17.33% from $1.823 billion in March.
The majority or $1.056 billion of outflows were recorded in investments in peso-denominated government securities, down from net inflows of $1.142-billion in April last year.
Meanwhile, investments in Philippine Stock Exchange (PSE)-listed securities saw net outflows of $545 million, higher than last year’s outflow of $284 million.
Short-term foreign investment left the country in April as uncertainty over the country’s tensions caused investors to be more cautious, analysts said.
“April’s overall outflows came as investors became more cautious amid geopolitical tensions, a strong dollar, and uncertainty over global interest rates,” SM Investments Corp. said. (SMIC) Group Economist Robert Dan J. Roces in a Viber message.
“Foreign funds tend to move quickly when risk sentiment changes, and that’s what we’ve seen,” he added.
The ongoing war in the Middle East, which erupted in late February, also continued to shake the domestic and international markets, which may have led to heavy outflows for two straight months, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort commented.
“This is mainly due to the second full month of the war in Iran / Middle East since Feb. 28 that increased the volatility of the global and local markets amid the sharp increase in the prices of crude oil, fuel, and petroleum around the world, high inflation, and a possible increase in the central bank rate,” he said on Viber.
Uncertainty surrounding the three-month conflict between the United States and Iran continues to fuel market volatility, raising inflation for major oil importers and weighing on currencies such as the Philippine peso as the U.S. dollar strengthens in search of a safe haven.
In April, inflation in the Philippines rose to its fastest pace in three years at 7.2% from 4.1% in March as oil prices offset higher food and utility costs.
Meanwhile, the peso touched the P61 mark for the first time in April, dropping 73.7 centavos to close at P61.485 against the greenback on April 30 from its close of P60.748 on March 31.
The BSP has shifted to a hawkish stance, with increasing calls for rate hikes to curb rising 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. said they may continue to use monetary policy to bring inflation back to their target of 2%-4%, with cyclical increases to be considered before the Board’s next review on June 18.
April’s total outflow brought the country’s highest four-month total outflow of $4.407-billion. This also marked a change in short-term foreign investment amounting to $923 million that flowed into the country during the same period last year.
Discounted, foreign investment in government securities totaled $3.072 billion in the January-April period, reversing the $1.68 billion inflow seen a year ago.
Meanwhile, hot money outflows from PSE-listed securities stood at $1.34 billion as of April, well above the $755 million outflows recorded last year.
“In the coming months, the flow may remain volatile, with periods of both inflow and outflow, depending on how global markets, the Fed, and the peso evolve,” said Mr. Roces of SMIC.
The BSP projects that FPIs will end this year with a total of $3.7 billion, unchanged from the estimated total inflows in 2025.
