Although it cannot be denied that growth among the economies of emerging market nations has been strong and is very real, with GDP growth rates of as much as 11% a year, compared to 3% in the U.S., many are now warning of a flood of speculative money in search of returns, Forbes reports.
So far this year, foreign investors have poured $213 billion into emerging markets, whose markets have grown an average of 39.5% a year since 2002, according to the Institute of International Finance. Five years ago, there was only one emerging market mutual fund, but today there are 16, according to Morningstar. Last year, emerging market mutual funds had $11 billion in assets under management, and this year, that has grown 29% to $14.2 billion, according to AMG Data Services.
But this has made many asset managers and analysts nervous. “This is strongly reminiscent o the flows into technology in late 1999 and early 2000,” said AMG President Robert Adler. A look at the price/earnings multiples also gives many pause. The P/E ratio of Morgan Stanley’s emerging market stock index is 18.5, just ahead of the S&P 500.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.