BSP: ‘Hot money’ inflow plunged 71% in Nov.

Foreign portfolio investments to the country dropped again in November as the lingering debt crisis in the eurozone continued to dampen risk appetite of fund owners.

According to the Bangko Sentral ng Pilipinas (BSP), net inflow of foreign portfolio investments amounted to $490 million in November, plunging by nearly 71 percent from the $1.7 billion reported in the same month last year.

In the first 11 months of 2011, net inflow of foreign “hot money” reached $3.9 billion, down by nearly 6 percent from the $4.2 billion seen in the same period last year.

“The drop “was due to investor concerns” on Europe, the BSP said in a statement.

The country’s performance in November, as far as attracting foreign portfolio investments is concerned, wiped out the gains made earlier this year, when investors were pouring in money to the Philippines and other emerging markets.

Earlier this year, yield-seeking investors were putting money in stocks and bonds from emerging markets, which became the investment location of choice for portfolio fund owners.

However, analysts said, investors became risk-averse due to the prolonged crisis in Europe zone.

This outlook on the eurozone has affected even the sentiment toward emerging markets, most of which are dependent on the West for their own economic growth.

The eurozone is a major export market and is also a source of

investments for many emerging economies. Also, eurozone plays host to many migrant workers from the Philippines and elsewhere, whose remittances help fuel consumption in their respective economies.

The strong hot money inflows earlier this year pushed the peso up to as high as the 42-to-a-dollar level. But the decline in inflows reported in recent months caused the local currency to again hover in the 43 level.

The crisis in the eurozone is expected to go on well through 2012. As a result, inflows of hot money may continue to slow down.