Emerging markets in a bubble?

NEW YORK – U.S. investors have poured so much money into emerging markets, some on Wall Street are comparing it to the tech-stock bubble of the 1990s.

The parallels are there: A massive run-up that attracted herds of investors, pushing prices up to the point where they are hard to justify.

In the worldwide sell-off that started in May and lasted until Wednesday, when many markets began to recover, emerging market losses were steep – stocks in Brazil fell 29.59 percent; Indian stocks fell 32.44 percent, and stocks in Mexico dropped 24.72 percent, according to Birinyi Associates, a stock research firm.

Almost all the emerging markets have since turned around, but the sell-off looked like a sign that emerging stocks might be steeply overvalued.

Charles Biderman, chief executive officer of TrimTabs Investment Research, estimates that U.S. investors, both individuals and hedge funds, have poured $500 billion into emerging markets since 2004. He blames that outflow for the near stasis in U.S. stocks.

“If the money stops going offshore and goes into U.S. stocks, this could be the hot market going forward,” Biderman said. “We hope. Fingers crossed.”