Of the 11 asset classes listed as options to sell short, only two -- Group of Seven government bonds and junk bonds -- attracted more respondents than emerging-market stocks.
One of the main reasons is that economic growth, long a strength for developing nations, is sputtering. Earlier this week, the International Monetary Fund cut its forecast for the 2015 expansion across developing nations to 4.3 percent from an earlier estimate of 5 percent. It’d be the slowest expansion in six years.
The risk of capital flight may become more acute once the Federal Reserve starts raising interest rates after six years of record low borrowing costs, the IMF warned on Jan. 19. That may squeeze companies in developing countries, which boosted their foreign-currency debt outstanding to $1.2 trillion from $341 billion at the end of 2008, according to Bank of America Corp.
“Emerging markets have got a structural problem -- the dollar is in short supply,” Julian Brigden, managing partner of Macro Intelligence 2 Partners, who participated in the poll, said by phone from Hoboken, New Jersey.