International investors are sourcing new emerging market options as the lure of Asian markets lessens, according to a new survey from Standard and Poor's (S&P).

The S&P Emerging Markets Sentiment Survey of international fund managers found that while investors remain generally bullish about the outlook for emerging markets, a strong upsurge in Chinese and Indian financial markets and the resultant volatility means many currently consider Latin American markets a more attractive alternative for investment.

The survey reported that 56 per cent of managers believed Latin American markets offered the most attractive opportunities, compared with 53 per cent favouring Asian markets and 29 per cent emerging European markets.
 
"Fund managers are demonstrating some fatigue with Asian markets and appear to be rotating into other regions, especially Latin America, where relative value may be more appealing," said S&P chief economist David Wyss.

"It is nonetheless striking how positive they remain about emerging markets in general, despite the bull run we have seen in both emerging market debt and equities," Wyss said.

Overall managers remained bullish about the general state of emerging markets, with 48 per cent more positive about the outlook for stocks in the second half of 2007 than at present, while only 5 per cent were more bearish.

Potential factors that could derail the second half of 2007 for the markets included the direction of the US economy, rising global interest rates and global inflationary pressures.

The impact of increased used of credit and equity derivatives in any prolonged spells of volatility in emerging markets was also a concern to over half those surveyed.

Still, the survey reported 73 per cent of managers expected their assets under management in emerging market securities to increase by the year end, while only 4 per cent forecast a decrease.

"With liquidity continuing to flow towards emerging markets, the concerns that fund managers have about risks seem to be comfortably outweighed by the opportunities they continue to see in these markets," Wyss said.

"Our survey suggests the momentum is still firmly with emerging markets."

The survey consists of 150 global fund managers, who manage over $500 billion in assets under management in emerging markets.