LONDON -- Global fund managers remain bullish on emerging market assets for the rest of the 2007, a survey from Standard & Poor's said on Thursday.
The survey found 48 percent of investors are more positive about the outlook for emerging market stocks in the second half of 2007 than at present versus five percent who said they were bearish.
Latin American markets are viewed more attractively than Asian markets, the survey of 150 global fund managers found.
Emerging Europe was a distant third, David Wyss, Standard & Poor's chief economist told Reuters.
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The survey suggests a growing wariness about the outlook for Asian emerging markets, following big gains in Chinese and Indian financial markets in the last year and their recent volatility.
"The results though show they like debt in Latin America while on the equities side they prefer Asia," Wyss said, adding the firm plans to make this an annual survey.
The survey found 51 percent are more positive about their outlook for local currency debt versus 32 percent for external currency debt for the remainder of 2007.
But 73 percent of the fund managers who control over $500 billion in emerging market assets expect their coffers to expand with more cash.
"The cash is going to keep on coming and they have to find places to put it. Because of that 70 percent of the fund managers believe generating returns is going to become more difficult," Wyss said.
"But generally people are feeling pretty optimistic about emerging markets and this is confirmed by our ratings as we are seeing significant upgrades across the board," Wyss said.
The positive view on emerging markets is underpinned by attractive yields and valuations, a positive outlook for local economies and large foreign currency reserves, the survey said.
But investors are not blind to significant risks.
Uncertainty about the direction of the U.S. economy, rising global interest rates and global inflationary pressures were cited as the biggest risks facing emerging markets over the next six months.
Nearly 1 in 2 respondents cited country specific risks as the primary driver for their investment decisions. More than half said they were concerned about th possible impact of increased use of credit and equity derivatives in any bout of extended volatility.
"They also remain pretty pessimistic about governance standards. Only 28 percent feel corporate governance will approach developed country standards," said Wyss.
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