Emerging market boom replaces bursting U.S. bubbles

But emerging markets are particularly prone to bubble behaviour because they are small compared with the deep and mostly liquid equity and bond markets of the world's major economies.

Analysts at Merrill Lynch estimate that equity markets in Brazil, Russia, India and China represent only 4 percent of world market capitalisation compared with 44 percent for the U.S. equity market alone.

"The short and intermediate risks to emerging market equity prices remain skewed to the upside and we continue to think that an asset bubble seems likely, led by BRIC markets," Merrill told clients this week

The fear is that when money starts to leak from developed to developing markets it supercharges already-elevated assets and stokes inflationary and systemic problems down the road.

"Global emerging markets are still small so asset managers' switch to emerging markets has a disproportionate impact," said Richard Batty, investment director at Standard Life Investments.

"And there is still a lot of liquidity out there," said Batty, adding up to 65-70 percent of leveraged corporate bond investor holdings are in cash right now and need to reinvest.

But the unleashing of a new wave of global liquidity comes just at a time when many policymakers and central bankers are urging caution about inflation and commodity-price pressures.

Managing those pressures will now be trickier as money sloshes around the system and surfaces in unintended places.

EMERGING SLIPSTREAM