More foreign funds entered PH stock, bond markets in July
More flighty foreign funds entered the Philippine capital markets in July, after worries that the US Federal Reserve might aggressively cut rates to prevent the American economy from stalling drove investors to Asian markets.
Foreign portfolio investments (FPIs) recorded a net inflow of $1.38 billion in July, 1.4 times larger compared with a year ago, the Bangko Sentral ng Pilipinas (BSP) said in a report. This was a reversal from the $27.26-million net outflow recorded in June.
Also known as “hot money” because of their tendency to leave at the first sign of trouble, FPIs are highly sensitive to developments onshore and offshore unlike firmer commitments such as foreign direct investments, which tend to stay longer and can generate jobs for Filipinos.
A net outflow means more of these short-term foreign funds left the economy against those that entered during a period, while a net inflow means the reverse happened.
Dovish signals
Data showed the July reading was the largest hot money net inflow in more than two years or since April 2022.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the higher inflows came amid “dovish signals by local and Fed officials, mostly softer US economic data and easing US inflation gauges that could justify future Fed rate cuts from 2024 to 2026 that could be matched locally.”
Broken down, gross FPI inflows almost doubled year-on-year during the month to $2.43 billion, with government debt securities like Treasury bonds and Treasury bills cornering 71.3 percent of the funds. The remaining 28.7 percent were invested in publicly listed firms, mostly in banks, holding firms and property companies.
Meanwhile, $1.05 billion in short-term foreign funds headed for the exit in July, down by 1.9 percent. The United States, considered a safe haven by investors, remained the top destination of outflows after receiving 45.3 percent of total outward remittances.
That brought the seven-month tally to a net inflow of $1.5 billion, still far from the BSP’s full-year projection of a $3.1-billion net inflow. But it was nevertheless bigger than the $157.3-million net inflow posted in the comparable period last year.
