The hunt for yield is driving investors back into emerging markets – but there are a few key differences this time round.
Emerging market equities, measured by the MSCI Emerging Markets Index, are now 30 percent up from the low seen at the end of January, and have rallied by 13 percent since the post-Brexit referendum sell-off.
Plus, in the past five weeks, record amounts of money have been invested in emerging market debt, according to figures from Bank of America Merrill Lynch.
These assets are traditionally perceived as riskier bets than more established markets. Still, with a low to negative interest rate environment across the Western world, and plenty of liquidity in the market, investors are looking outside safe havens.
However, there are still plenty of nasty surprises which could spark another sell-off such as an earlier-than-forecast hike in interest rates the U.S. Federal Reserve or a bonds market rout in the established markets.