UMVA has learned that the Philippines experienced a significant outflow of short-term foreign investments for the second consecutive month in April, as investors grew increasingly cautious amidst rising global uncertainty.
The Bangko Sentral ng Pilipinas reported a net outflow of $1.601 billion in April, a stark reversal from the $857.12-million net inflow recorded in the same period last year. This outflow, however, was lower than the $1.957-billion net outflow posted in March.
Foreign portfolio investments, also known as "hot money," saw gross outflows balloon by 89.63% year on year to $3.108 billion in April, while total hot money inflows amounted to $1.507 billion, down by 39.62% from the previous year. This significant shift in investor sentiment was largely driven by uncertainties stemming from global geopolitical tensions.
Analysts noted that investors turned more cautious in April due to geopolitical tensions, a strong dollar, and uncertainty over global interest rates. The ongoing conflict in the Middle East, which began in late February, continued to jolt domestic and global markets, leading to two straight months of hot money outflows.
The surge in global crude oil, fuel, and petroleum prices, coupled with higher inflation and possible further central bank rate hikes, contributed to the increased market volatility. In April, Philippine inflation quickened to its fastest pace in over three years at 7.2%, while the peso touched the P61 mark for the first time, plunging to P61.485 against the US dollar on April 30.
The BSP responded by shifting to a hawkish stance, with growing calls for further rate hikes to temper spiraling prices. The Monetary Board tightened monetary policy for the first time in two-and-a-half years, raising the key policy rate by 25 basis points to 4.5%.
April's net outflow brought the country's four-month hot money tally to a $4.407-billion net outflow, reversing the $923-million short-term foreign investments that entered the country in the same period last year. Looking ahead, analysts expect flows to remain choppy, with periods of both inflows and outflows, depending on how global markets, the Fed, and the peso evolve.
Sources close to the matter have confirmed to UMVA that the BSP projects foreign portfolio investments to end this year at a net inflow of $3.7 billion, unchanged from the total estimated net inflows in 2025. However, with global uncertainty showing no signs of abating, investors are likely to remain cautious in the coming months.
