Investors have begun pulling money out of emerging economies mainly because they think that the U.S. Federal Reserve central bank may be about to wind down its easy-money policy which has supported the economy and pushed funds into the financial system.

This prospect has reduced the willingness of fund managers to take risks even though only a few months ago their focus was more on a rapid rise of stock markets and signs that maybe assets prices were overheating.

At HSBC Global Asset Management France, the head of personal portfolio investment Olivier Gayno said that stock markets in emerging economies had fallen “by more than 5 percent in a month.”

On Thursday, stock markets in Asia fell heavily, with prices in Manila, Bangkok and Jakarta following a plunge of 6.35 percent on the Tokyo market.

European stocks opened with falls of 1.0-1.5 percent.

The main cause is in the form of signals from the U.S. central bank that it is likely to begin turning off the tap which has kept huge amounts of new money flowing into the financial system each month as part of exceptional measures to help the economy to pull away from five years of crisis and weak growth.

This policy bolstered confidence which in turn reversed a reluctance of investors to take risk: instead they began switching funds into assets offering higher returns than government bonds, and in particular to emerging markets which have been achieving relatively strong growth.

This trend was so strong that the International Monetary Fund warned that the inflow of funds could cause overheating in emerging economies. (AFP)