Inflows to emerging market funds surpassed the record £20bn total for the whole of 2005 in the first 13 weeks of 2006. More recently, though, investors seem to be becoming warier. According to Emerging Portfolio Fund Research, net new flows to emerging market equity and bond funds had their second slowest week of the year last week. Does this mark the turning point in the boom?

Over the last three years emerging stock markets have risen an impressive 184 per cent. In the last 12 months alone the MSCI Emerging Markets Free index is up over 50 per cent. Some of the attractions of investing in these markets have certainly waned. Rising interest rates in the developed world have made carry trades less appealing, while wobbles in peripheral markets such as Iceland and New Zealand have led to increasing risk aversion.