The country’s net hot money inflows surged to $1.383 billion in July, the highest foreign portfolio investments registered by the Bangko Sentral ng Pilipinas (BSP) so far for this year, based on current data.

The July net hot money is bigger compared to same period last year of $961.58 million. It also reversed the small net outflow in June of $27.26 million.

With speculative investors placing more funds in government securities and the stock market, the BSP registered gross inflows of $2.432 billion in July while gross outflows reached $1.049 billion. This was both higher compared to same time in 2023 of $1.576 billion gross inflows and $614.93 million gross outflows.

Hot money portfolios are foreign investments registered with BSP through authorized agent banks (AABs). Considered highly speculative funds, hot money investments are inward foreign investments invested not just in listed securities and government securities, but also in peso-denominated time deposits with banks with minimum tenor of 90 days, and other debt instruments. It can also be invested in unit investment trust funds and other instruments such as Exchange Traded Funds and Philippine Depositary Receipts.

Portfolio investments which also includes money market instruments are tradable in the market. These are referred to as hot money because of its short-term nature.

Based on BSP numbers, the year-to-date transactions or January to July net hot money totaled $1.454 billion, much higher than same time last year of $81.26 million.

From January to July, gross inflows totaled $9.767 billion while gross outflows amounted to $8.312 billion.

In July, the central bank said 71.3 percent of registered investments or $1.734 billion were in peso-denominated government securities while 28.7 percent or $697.67 million were in listed securities mostly banks, holding firms, property, transportation services, and food, beverage and tobacco stocks.

About 93.7 percent of total foreign portfolio investments came from investors based in the United Kingdom, the US, Singapore, Luxembourg, and Norway.

It is optional for AABs to register inward foreign investments with the BSP. It is required only if the investor or its representative will purchase foreign currency from these banks or their subsidiary/affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment, said the BSP.

Without such registration, the foreign investor can still repatriate capital and remit earnings on its investment but the foreign exchange will have to be sourced outside the banking system.

The BSP is projecting that for this year, net hot money could reach $3.1 billion, higher than actual 2023 portfolio investments of $600 million. For next year, the BSP forecasts $2.2 billion net hot money inflows.