Attractive opportunities are developing overseas, because many countries still are in the early stages of embracing new technology.

But because both types of investment offer a high risk/high return profile, there has been some concern the boom in techs would act as substitute rather than a complement to emerging markets.

But it seems most of the money pouring into technology stocks is new money rather than funds diverted from traditional emerging market portfolios.

The profile of these stocks is radically different from traditional emerging market plays, some of which have recently fallen out of favour.

"(High-tech investment) is diverting money from elsewhere — the cement and steel sectors probably feel unloved and unwanted," said Matt Linsey who heads Barings Asset Management emerging markets division. "It's going to help us but it could hurt us too...I think it will take some of the more opportunistic money away."

Money Changing Sector

Fund managers say though some sectors may be losing their appeal, money that is diverted is not necessarily leaving the emerging market universe altogether but rather changing sector.

"People are looking more at technology than traditional industries in emerging markets just as they are in developed markets," said Jacob Rees-Mogg, fund manager at Lloyd George Management which specialises in Asian and emerging markets.

"Some of the price performance has been very impressive and has encouraged people to look at emerging markets. I think it's in line with a broad trend of globalisation in investors' outlooks - people see a particular type of stock in the United States, then look at Europe then look at the rest of world."

Fund managers said the new 'emerging' technology market is different from markets traditionally given that label.

"I think it's a slightly different profile. The Russian commodities market obviously has risks of its own...whereas with technology stocks you're essentially taking a risk on valuation," said Rees-Mogg.

"The transition to new technology is definitely happening — it's a reality whereas people have got excited by emerging markets that have never emerged," he said.

Some markets, primarily Asian countries such as Taiwan, Korea and India, are in the perfect position to benefit from the new high-tech gold rush.

By basing manufacturing in China, low-cost semi-conductor producer Taiwan takes advantage of Taiwanese management and Chinese wages to keep prices down, while India is proving to be a leader in software development.

On top of which a lack of telecommunications infrastructure could ironically prove to be a plus point as emerging countries leapfrog old technology and move straight to mobile telephony.

SG Securities said in its first quarter 2000 global strategy outlook "there is a fundamental shift to technology in Asia and a fundamental change in sectoral make-up within Global emerging markets."

Other regions will benefit from the advances too.

"For Central and Eastern Europe new technology maybe won't benefit them immediately, but in terms of technological advancement it is certainly to their benefit," said Linsey.

In 1999 the IFCI Composite index rose 60 percent, a benchmark stock index for emerging market investors, compared to an 84 percent rise in America's tech-heavy Nasdaq index.

Fund managers believe technology stocks are attracting new investors into countries that they would never traditionally have looked at, drawing attention to some of the growth potentials and valuations in emerging countries.

From flat panel display technology in Israel to Indian computer software, the growth is likely to boost stock markets across the spectrum. Existing businesses are also going to benefit heavily, particularly telecommunications firms.

"We are competing head to head with the Nasdaq," said Tim Love, global emerging markets strategist at SG Securities. "We have a limited number of pure internet plays, but we also have quasi plays like (Polish state-controlled telecoms) TPSA and Hungarian telecom Matav."

He said there was an increasing correlation between emerging markets and the Nasdaq as interest in technology as an asset class grows, with differing levels of correlation for software, memory chip and Internet stocks which, he added, were oversubscribed in emerging markets just like anywhere else.

— Reuters contributed to this report