Investors in emerging market equities have developed a serious case of cold feet. Emerging markets have underperformed the developed world for almost three years now, according to the widely used MSCI indices. Once seen effectively as a leveraged bet on growth in the developed world, investors now plainly view them as risky.

No such reticence applies to investors in emerging market debt. The JPMorgan Embi indices show that the sector is at record levels. On an absolute return basis, emerging market debt has kept up the pace of developed market stocks since the 2008 financial crisis. It has achieved this despite growth in capacity. Since 1998, after the Asian crisis, the entire emerging market debt universe has multiplied about tenfold, from about $1tn to $9.8tn, says a survey by the BlackRock Investment Institute. Meanwhile, investable debt – tied to benchmark indices, has increased fivefold in the past decade, to exceed $2.5tn.

But it is not just a question of bond market investment. Cross-border flows from banks are also booming. One chart put together by BlackRock makes this point in an alarming fashion, using data from the Bank for International Settlements. Starting at 2003, foreign banks increased their lending to the Brics (Brazil, Russia, India and China), at exactly the same rate as they boosted their lending to four main peripheral Eurozone economies that would subsequently be hit by crisis – Italy, Spain, Portugal and Ireland. By 2008, foreign lending to both blocs had increased by 250 per cent since 2008. But after the credit crisis hit, peripheral eurozone lending dropped back towards its 2003 level.