GLOBAL - Emerging market funds worldwide could be facing a significant reversal, according to Standard & Poor's Fund Services' annual review of the sector.
Roberto Demartini, lead analyst, S&P Fund Services, said: "It is clearly too early to tell if this trend is due to continue," noting that emerging market fund managers saw the macro picture for their regions as extremely solid.
"However, the Q1 results point up the possibility that the much discussed "decoupling" either might not materialise or might not result in emerging markets outperforming developed markets," he added.
Demartini said while the vast majority of fund managers interviewed for the review were positive on the macroeconomic situation in emerging markets, they were wary of valuations and in particular of the increased correlation between developed and emerging markets.
He said managers also highlighted the risks involved with a global slowdown and noted that food inflation was becoming a significant source of concern, in particular for food importing countries.
The S&P annual review included reports on 40 funds investing in global emerging markets, five in Brazil, Russia, India and China, eight in Latin America, nine in emerging Europe and one in South Africa.