"Global emerging markets are still small so asset managers' switch to emerging markets has a disproportionate impact," said Richard Batty, investment director at Standard Life Investments.
"And there is still a lot of liquidity out there," said Batty, adding up to 65-70 percent of leveraged corporate bond investor holdings are in cash right now and need to reinvest.
But the unleashing of a new wave of global liquidity comes just at a time when many policymakers and central bankers are urging caution about inflation and commodity-price pressures.
Managing those pressures will now be trickier as money sloshes around the system and surfaces in unintended places.
Fundamental factors driving funds into emerging markets are well documented.
Economies there continue to boom. The International Monetary Fund expects developing country growth, at 7.5% this year, to be three times that of the developed world.
This boom, in turn, is fueling world commodity prices and dropping massive windfalls in commodity-rich emerging nations.
But, perhaps most powerfully, the U.S. dollar is falling sharply on the back of a U.S. economy being weakened further by housing and credit problems. The Fed cut heaped on the pressure.
This dollar weakness has tempted more U.S. funds offshore and flooded the coffers of emerging market central banks intent on preventing a greenback slide undermining thier exports.
"Mutual funds are switching away from the U.S. to emerging markets," said Batty at Standard Life, adding some of the $700 billion of U.S. equity which was dumped last year leaked
straight to emerging markets.
But why in the face of recession fears and a falling currency has Wall Street too powered to a record high on Monday?
Two big reasons are related to emerging markets too.
Rising Currency Reserves
The first is that rising hard currency reserves in emerging markets -- $4.3 trillion at the IMF's last count -- are partly being channelled into so-called sovereign wealth funds and are
expected to be reinvested over time in world markets such as U.S. and European equities among others.
Investment banks estimate the total size of these sovereign funds could climb as high as $12 trillion by 2015.
And another reason for U.S. and European equities being drawn into the slipstream is transnational firms there are increasingly dependant on earnings growth from overseas.
Bank of America estimates that overseas earnings of U.S. companies soared 16.4 percent in the first quarter of this year and U.S. affiliate sales and income in countries such as Poland,
Russia, Brazil, China and Turkey are running at record highs.
Domestic earnings by contrast rose by just 2.7 percent.