“Hot Money” Flows Turn Positive in October

Foreign investment registered with Bangko Sentral ng Pilipinas (BSP) turned positive in October, snapping four months of net outflows that began in May.

The Savings and Credit Union said in a statement that “hot money” net inflows of $83 million were a reversal from a net outflow of $367 million in September.

Inflows totaled $645 million, while the decline of 27.7 percent month-on-month more than compensated for $561 million in total outflows that were steeper by 55.4 percent.

Transactions, formerly called Foreign Portfolio Investments, represented foreign funds registered with BSP through authorized agent banks (AABs) that were used to purchase stocks, government bonds, term deposits and similar instruments.

It is also known as “hot money” due to the ease with which money can be invested and taken out of a country.

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The majority of October investments, or 73.0 percent, went to securities listed on the Philippine Stock Exchange, mostly property, banking, holding companies, food and beverage, tobacco and telecom. The remainder was invested in government securities, the peso (27 percent) and other instruments (less than 1 percent).

Most of the month’s investment came from the United Kingdom, the United States, Singapore, Luxembourg and Hong Kong which accounted for 84.4 percent of the total.

Meanwhile, the United States received 67.7 percent of the total outflow.

On a yearly basis, recorded investments decreased by 32.1% while total outflows also decreased by 52.1%. The net inflow of $83 million was also a reversal from the net outflow of $221 million recorded in October last year.

Year-to-date, foreign investments recorded in the Bills Settlement Payment System (BSP) were positive with net inflows of $305 million, a shift from net outflows of $680 million recorded in the corresponding period of 2021.

BSP said the registration of foreign investments via AABs is “optional under the Foreign Exchange (FX) Transactions Rules,” only “required” if the investor or his representative is going to purchase foreign currency from AABs and/or foreign exchange subsidiary/affiliated companies to repatriate capital and transfer Profits accrued on a registered investment.”

“Without this registration, the foreign investor can still return the capital and transfer the profits of his investments, but the foreign currency must be obtained from outside the banking system,” the central bank said.

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