Schroders says bubbles building in emerging markets

By Raji Menon

LONDON (Reuters) - "Easy" money being pumped into emerging market economies by Western governments could lead to asset price bubbles, Schroders chief investment officer said.

While valuations in emerging market economies still looked reasonable, there were signs the regions are beginning to overheat, Alan Brown told reporters on Friday.

"Our concern today is that with the developed world having had its crisis and now that we have extraordinarily easy money here, that may be providing the fuel for an asset bubble in the emerging markets," he said.

"And there are some signs that's beginning to happen."

Benchmark emerging equities .MSCIEF have risen more than 85 percent since lows reached in early March, compared to a 60 percent rise in the MSCI World index.

Brown said global equity markets should maintain their current momentum over the next 3-6 months until quantitative easing programmes come to an end. "I think it (QE) has been a very significant influence (in the recent equities rally) and I believe that it is still having an influence."

Brown said that with more money sitting on the sidelines, investors would continue to invest every time markets dip.

"That's not necessarily a strong foundation for the market. When the fire-hydrant of money is turned off, there is a possibility that we will see a setback."