Anyone who thought that a taste for emerging markets was just a fad, generated by modish and over-satiated western investors, will have to think again. Amid what is frequently described as a repricing of risk across all the capital markets, far from going out of fashion or succumbing as the first victims of the liquidity crisis, emerging markets are now a safe bet.
The customary flight to quality during a period of turmoil is, for the first time, seeing an exodus to a diverse range of emerging markets, away from developed economies. According to Emerging Portfolio Fund Research, more than 80% of the $29bn in net fund inflows to emerging markets this year arrived in the two months following the outbreak of the credit crisis in August. In the same period, US, European and Japanese equities saw net outflows of billions of dollars. What is more, the MSCI Emerging Markets index rose by one-third in the two months after August 18.
