By means of Luisa Maria Jacinta C. Jocson, Reporter
MORE SHORT TERM foreign Investments flowed into the Philippines in November, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Foreign investment transactions registered with the central bank through authorized banks generated a net inflow of $96.59 million, a reversal from the $529.68 million outflow in October.
However, net inflows fell 85.6% from the $671.77 million inflow a year ago.
These foreign portfolio investments are also called “hot money” because of the ease with which these funds enter and leave the economy.
BSP data shows gross inflows rose 18.2% to $1.86 billion in November, compared to $1.57 billion in the same month a year ago.
During the month, investment inflows came mainly from the United Kingdom, Singapore, the United States, Luxembourg and Norway. These economies accounted for 90% of foreign investment inflows.
The majority (71.4%) of these investments went into peso government bonds, while the remainder (28.6%) went into Philippine-listed bank securities; holding companies; property; transportation services; and food, drink and tobacco.
Meanwhile, gross hot money outflows nearly doubled to $1.76 billion in November, up from $903.1 million a year earlier.
“The US remains the main destination of outflows, receiving $914.2 million (or 51.8%) of total outward remittances,” the central bank said.
In the January to November period, BSP-recorded foreign investment generated net inflows of $2.59 billion, a reversal from the $43.66 million net outflows in the same period a year earlier.
Gross net inflows were $16.88 billion, while net outflows in the eleven-month period were $14.29 billion.
“The data improved month over month after tensions between Iran and Israel eased following Iran’s second missile attack on Israel this year on October 1, but there has been no retaliation from Israel so far,” said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. said.
However, he noted that several political events weighed on markets during the month.
“The Trump factor continued to be the main catalyst for local and global markets in November, after Trump won the US presidential election on November 5,” Ricafort said.
“Possible higher US tariffs and trade war could slow global trade and global economic growth, similar to the first Trump administration.”
Markets have priced in the impact of Trump’s proposed policies on the Philippines, which is heavily dependent on the United States for business and economic activities.
His proposals include an increase in import tariffs on Asian economies, as well as stricter immigration measures. The new American president is about to take officeFice on January 20.
“Political noise since late October 2024 has also partly weighed on market sentiment.” Mr Ricafort added.
For the coming months, this could be offset by possible interest rate cuts by the BSP and the US Federal Reserve.
The BSP has implemented a total of 75 basis points (bps) of interest rate cuts this year, bringing the benchmark to 5.75%.
BSP Governor Eli M. Remolona Jr. announced further easing, but noted that implementing rate cuts worth 100 basis points in 2025 could be “too much.”
The central bank is likely to continue cutting rates in “baby steps” as it continues to closely monitor upside risks to inflation, the BSP chief added.
Mr Ricafort also noted the recent upgrade of the country’s credit outlook.
S&P Global Ratings published at the end of NovemberFon Tuesday affirmed the Philippines’ investment grade rating and raised its outlook from “stable” to “positive,” reflecting the economy’s strong growth potential.
The BSP expects foreign portfolio investments to generate net inflows of $4.2 billion this year.