Less foreign funds may come PH’s way, says Moody’s

The Philippines is seen cornering less foreign portfolio investments this year due to the heightened risk aversion resulting from the prolonged debt crisis in the eurozone.

According to Moody’s Analytics, the absence of a solid resolution to the crisis in Europe is likely to keep fund owners on the sidelines and liquidate investments in emerging markets like the Philippines.

“Asia, including the Philippines, is a more attractive investment destination than much of the developed world given its stronger growth prospects. But it is also a riskier destination, and the global appetite for risk has eased thanks to Europe,” Katrina Ell, associate economist at Moody’s Analytics, said in an e-mail.

Moody’s Analytics, a research unit of Moody’s Corp. and sister company of credit-rating firm Moody’s Investors Service, said the decline in portfolio investments so far seen this year is likely to be the trend for the rest of 2012.

The Bangko Sentral ng Pilipinas earlier reported that net inflow of foreign portfolio investments—led by purchases of publicly listed stocks and government securities—amounted to $772.4 million in the first four months of the year, down by 53 percent from $1.65 billion in the same period a year ago.

Some economists earlier projected that the crisis in the eurozone could push yield-seeking investors to purchase more securities from emerging markets like the Philippines and less from eurozone and other advanced economies.

But for Moody’s Analytics, the prolonged debt crisis may be seen by investors as dampening prospects for global economic growth and adversely affecting performance even of emerging markets like the Philippines.

Consequently, it said “hot money” inflows to the Philippines and its neighbors may contract this year.

“We expect that if the Europe’s debt crisis continues to pull investors to safe havens as it has been over the past weeks, capital inflows to the Philippines will ease,” Ell said.