Hot money outflow swings up 20%

Net outflow of short-term investments or hot money last year increased to $15.82 billion, or 20.5 percent higher than the $13.14 billion in 2023, the Bangko Sentral ng Pilipinas (BSP) reported.

The BSP said most investors redirected investments to the United States with a 49.8 percent share of total outflows.

Capital repatriation accounted for 96 percent of the total outflows, while remittance of earnings represented the remaining 4 percent.

However, the BSP said the country posted net inflows of $2.1 billion last year, a reversal from the $248.84 million in 2023.

Peso bond sales up

This stemmed from higher net inflows of investments in peso-denominated government securities which jumped by 284.2 percent to $3 billion.

However, investments in equities listed with the Philippine Stock Exchange registered net outflows of $897.53 million, down from $1 billion in 2023.

For December, the BSP recorded net outflows of $487.37 million, a reversal of the $96.59 million net inflows in November.

All foreign investments processed by BSP-licensed banks for the full year of 2024 reached $17 billion or 39.2 percent higher than the 2023 level.

The bulk of investors’ funds was placed in government securities with a 54.2 percent share, while the remaining represented stocks.

Top recipients of equity investments included banks, holding firms, property developers, transportation providers and food, beverage and tobacco manufacturers.

Most investments came from the UK, Singapore, US, Luxembourg and Hongkong.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said foreign investors preferred government securities, taking advantage of the elevated global interest rates.

The BSP started cutting its policy rate in August by 25 basis points and by the same degree in October and December toward 5.75 percent.

“Some investors lock in still relatively higher yields amid market expectations of future Federal Reserve rate cuts,” Ricafort said.

He added the high interest rates reflected investors’ anticipation of higher global inflation from protectionist tariffs and immigration policies under the Trump administration.

Meanwhile, investors were upbeat on US equities as re-elected US President Donald Trump promised to slash US firms’ corporate income tax to 15 percent from 21 percent.

“As tax cuts will be deeper, there will be less government revenues. But the high tariffs on imports will compensate for the tax cuts and the tax cuts will invigorate businesses to spend that will generate earnings,” Security Bank chief economist Angelo Taningco said.

Ricafort expects more foreign investments this year as the government implements lower corporate income tax to registered business enterprises at 20 percent from 25 percent.