Publié par : crise2007 | octobre 22, 2007

Emerging markets could be next bubble

Emerging markets could be next bubble

By Rex Nutting, MarketWatch

Last Update: 5:25 PM ET Oct 21, 2007

WASHINGTON (MarketWatch) — Investors searching for big returns and no exposure to U.S. subprime mortgages are looking at emerging markets, raising the possibility that too much money could flow in, pumping up another bubble, top international bankers warned Sunday.

Emerging markets have largely been spared any major impact from the subprime and structured finance crisis that has shaken markets in the United States and Europe, according to a report released Sunday by the Institute of International Finance.

 

The group, consisting of hundreds of bank worldwide, said capital flows into emerging markets will reach a record $620 billion this year and should stay close to that level in 2008.

« Emerging markets have demonstrated notable resilience in the face of recent dislocations in global financial markets, » said Josef Ackermann, chairman of Deutsche Bank AG and the chairman of the IIF.

But the bankers also sounded a warning.

« The period immediately ahead is fraught with risks for the global economy, risks that could spill over into emerging market finance, » said William Rhodes, CEO of Citibank and first vice chairman of the IIF.

« I am concerned that investor faith in emerging markets, which may strengthen because of the resilience that has been displayed, could push asset prices up to unsustainable levels, » Rhodes said. « Markets could overshoot, and when a correction comes, then there could be a hard landing. »

« They have almost become a safe haven now and there is the risk of them developing asset bubbles, » said IIF Managing Director Charles Dallara

Emerging markets are being favored in part because « financial innovations are less common in developing countries, » said Heidemarie Wieczorek-Zeul, German economics minister, in remarks to the IMF/World Bank Development Committee.

Rhodes said strong demand for commodities is also boosting performance in the emerging markets. Higher commodity prices have the potential to fuel inflation, which is already being seen in China. Rhodes urged the Chinese authorities to take « additional steps » to cool off the overheating Chinese economy.

Ackermann said equity markets in the developed economies should remain strong « as long as the macro impact isn’t worse, referring to the financial turbulence in the subprime mortgage market and related structured finance. End of Story

Rex Nutting is Washington bureau chief of MarketWatch.

 

 

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