Foreign investments posted a net outflow of $42 million from January to November as investors waited for inflation rates to fall in the recent months, the Bangko Sentral ng Pilipinas, or BSP, reported Thursday.

The figures were a reversal of the $794 million net inflows recorded in the same period last year based on the BSP data.

In November, however, transactions on foreign investments resulted in net inflows of $673 million, following net outflows of $328 million in October this year.

The reversal last month stemmed from higher gross inflows of $1.6 billion compared to gross outflows of $902 million.

BSP data show inflows of foreign investments rose by 65 percent or $620 million in November from the level in the prior month and by 37.7 percent  year-on-year.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation, said the recent disinflation was a major factor for increased net inflows in November as investors gained extra cash for investments and a better economic outlook.

Crude prices to blame

"The highest net foreign portfolio investment inflows in four months in November were largely brought about by the sharp decline in global crude oil prices that largely helped global and local inflation to ease further towards the central bank targets, thereby supporting pause in US and local policy rates," he said.

Overall inflation from October to November slowed further to 4.1 percent from 4.9 percent, according to the Philippine Statistics Authority.

Economists said the better local and US inflation rates prompted the BSP and the Federal Reserve to keep their policy rates steady.

"The benchmark for 10-year US Treasury yield eased to five-month lows that reduces borrowing costs and improves valuations of some listed companies," Ricafort said.

"The US dollar declined to new five-month lows amid the recent gains in Emerging Markets such as the Philippines since November," he added.

BSP reported foreign investments last month mostly consisted of government peso bonds with 71.4 percent share and value of $1.1 billion, while the rest was stocks amounting to $450 million.

Industries that attracted the biggest investments included banks, holding firms, property, transportation services, food and beverage, and tobacco.

The investments mostly came from the United Kingdom, Singapore, United States, Luxembourg and Hongkong.

Ricafort said economists expect bigger rate cuts from the Federal Reserve next year which could sway investors to Philippines issued securities.

"Analysts had a plot estimate of -0.75 rate cuts in 2024 but the markets recently priced in twice that at more than -1.50," he shared.

"Since Federal Reserve rate cuts would lead to further gains in the bond markets, stock markets, and lower US dollar and stronger emerging market currencies, foreign portfolio investments data could still improve," Ricafort continued.

The gross outflows in November were lower by 29.7 percent or $381 million than the October level.