Philippines’ hot money inflows plunge 91% in July as peso weakens to record low

MANILA, PHILIPPINES, MALAYSIA, ASEAN, KUALA LUMPUR, BURSA MALAYSIA, 1 SEPTEMBER 2026 —

PHILIPPINES’ HOT MONEY INFLOWS PLUMMET 91% IN JULY AS GLOBAL VOLATILITY PERSISTS

Net inflows of so-called “hot money”—portfolio investments that can swiftly enter or exit—fell to $66.47 million from $742.56 million a year earlier, according to Bangko Sentral ng Pilipinas (BSP) figures released on Sunday. The decline marked the sharpest year-on-year drop in over a year, extending a trend of weakening foreign interest in Philippine financial markets.

Month-on-month, the net inflow also shrank by 60.93% from $170.12 million in June, underscoring the fragile nature of these capital flows amid shifting global risk sentiment. Despite the pullback, July marked the third consecutive month of net inflows, a rare streak that analysts attribute to pockets of resilience in domestic markets.

OUTWARD FLOWS SURGE WHILE INWARD FLOWS WEAKEN

Gross outflows of hot money surged 33.21% year-on-year to $2.301 billion in July, up from $1.727 billion a year prior. However, the pace slowed from June’s $2.772 billion, suggesting some investors were locking in gains after earlier exits. Total inflows into Philippine assets also declined, dropping 4.15% to $2.368 billion from $2.47 billion in July 2024, and falling 19.53% from $2.942 billion the previous month.

The peso’s depreciation against the dollar likely played a role in the reduced inflows, with the local currency weakening to as low as P61.847 per dollar in July. The average exchange rate for the month stood at P61.5963, nearly 8.54% weaker than the P56.7523 recorded a year ago, BSP data showed. The currency’s decline mirrored broader emerging-market trends, as soaring oil prices amid Middle East tensions fueled safe-haven demand for the US dollar.

SECTORAL SHIFTS: STOCKS GAIN, GOVERNMENT SECURITIES LOSE

Most of July’s net inflows—$86 million—were directed into Philippine Stock Exchange (PSE)-listed securities, a stark reversal from a $141-million net outflow in the same month last year. In contrast, investments in peso-denominated government securities flipped to a net outflow of $20 million, down sharply from an $880-million net inflow in July 2024. The shift suggests foreign investors are favoring equities over fixed-income assets, possibly due to higher yield-seeking behavior in a rising-rate environment.

Analysts pointed to lingering global uncertainty as the primary drag on hot money flows. “Foreign portfolio investments posted a third straight month of net inflows in July, although the pace slowed to $66.47 million from $170.12 million in June, indicating that foreign investors remained selectively constructive on Philippine assets despite a more challenging global environment,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.

Robert Dan J. Roces, vice-president and group economist at SM Investments Corp., echoed this view, citing the peso’s volatility as a key deterrent. “The third straight month of inflows is a positive sign that foreign investors continue to see value in Philippine assets, supported by improving growth prospects and attractive yields,” he said. “The smaller July inflow, however, shows that investors remain cautious amid global uncertainty and peso volatility.”

YEAR-TO-DATE OUTLOWS NEARLY DOUBLE AS INVESTORS REMAIN WARY

Over the first seven months of 2025, net outflows of hot money reached $3.938 billion, a 72.3% increase from $2.285 billion in the same period last year. Combined gross outflows surged 60.82% to $19.546 billion from $12.154 billion a year earlier, while total inflows rose modestly by 8.1% to $15.608 billion.

Breaking down the data, foreign investments in government securities recorded a net outflow of $2.213 billion in the seven-month period, reversing a $3.742-billion net inflow in 2024. Outflows in PSE-listed securities also climbed to $1.728 billion from $1.461 billion a year prior, reflecting a broader trend of risk aversion among foreign investors.

The BSP has projected that full-year net inflows of hot money will total just $1.8 billion in 2025, down from an estimated $3.7 billion in 2024. “The Philippines remains fundamentally attractive, but foreign portfolio flows will continue to ebb and flow with global risk appetite,” said Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co.

REGIONAL IMPLICATIONS: MALAYSIA WATCHES AS ASEAN MARKETS FACE SIMILAR PRESSURES

The Philippines’ hot money struggles mirror challenges faced by other ASEAN economies, where foreign portfolio flows have become increasingly sensitive to global monetary policy shifts and geopolitical risks. Malaysia, another key regional market, has also seen volatility in its own hot money inflows, particularly in government bond markets, as investors reassess risk in emerging markets.

Bank Negara Malaysia’s latest data shows net foreign outflows from Malaysian government securities totaling RM12.5 billion ($2.8 billion) in the first half of 2025, driven by similar concerns over US interest rate trajectories and regional currency weakness. Analysts in Kuala Lumpur note that while domestic economic fundamentals remain, external factors—such as oil price fluctuations and Middle East tensions—are exerting pressure on regional capital flows.

“The key is that our macroeconomic story remains intact, which should help sustain investor interest over the medium term,” Ravelas said, a sentiment that resonates across ASEAN. Both the Philippines and Malaysia are grappling with the dual challenge of attracting foreign capital while managing currency stability in an unpredictable global environment.

STAKEHOLDERS URGE CAUTION AS POUNDING PESO TESTS STABILITY

The Philippine peso’s recent breach of the P62-per-dollar mark—hitting a record low of P62.265 on Aug 29—has intensified concerns about imported inflation and higher borrowing costs for businesses and consumers. BSP Governor Eli M. Remolona Jr. has acknowledged the difficulty of managing the exchange rate, stating that “the exchange rate itself is something very hard to fix for a country like the Philippines.”

For SM Investments’ Roces, the priority is to restore confidence in the peso through stronger policy signals. “We expect flows to remain uneven, but continued inflows would help support financial stability and the peso, which ultimately matters to businesses and consumers through more stable borrowing costs and prices,” he said.

Union Bank’s Asuncion added that while the BSP’s monetary policy remains supportive, the central bank’s room to maneuver is constrained by external factors. “While the Philippines remains on investors’ radar, flows are likely to stay measured and selective as markets navigate heightened uncertainty and a more complex interest rate and inflation environment,” he noted.

OUTLOOK: VOLATILITY LIKELY TO PERSIST THROUGH YEAR-END

Analysts expect hot money flows to remain erratic in the coming months, with global developments—such as US Federal Reserve policy decisions, geopolitical tensions, and oil price movements—continuing to dictate investor sentiment. The BSP’s conservative full-year projection of $1.8 billion in net inflows suggests that while the Philippines retains structural appeal, the path to sustained foreign capital inflows will be uneven.

For Malaysian investors and policymakers, the Philippines’ experience serves as a case study in managing volatile capital flows in a high-risk global environment. Both countries are likely to emphasize macroeconomic stability and structural reforms to mitigate the impact of external shocks on their financial markets.

As the year progresses, the interplay between global risk appetite and regional currency stability will remain a critical focus for ASEAN economies, with the Philippines’ hot money trends offering a bellwether for broader market sentiment.

Related: Eli M. Remolona Jr.