They said there will be a rush of money into emerging markets at the start of next year, given the relatively benign global economic environment and stronger outlook for emerging economies after the shocks of 1997 and 1998.

To beat the crowd, investors have until the end of November to position themselves before back office staff call a halt, said SG Securities global emerging market strategist Tim Love. "From our perspective, if you are able to exploit distress valuations before the year end, it really matters little what the cause has been to bring that about as long as it is short-lived and has a reasonably assessable downside," he said.

With the risk of Y2K computer problems concentrated around the New Year, Love believes risk is identifiable and, contrary to the doom-laden forecasts of many analysts, he says Y2K will paradoxically be less disruptive to emerging economies than developed ones.

"A lot of emerging economies already suffer from failures in communications and power, this will just be an extended brown-out," said Love.

The International Monetary Fund (IMF) has a worst-case analysis under which Y2K-related issues could shave 2.0 percent from the growth of 17 emerging market countries and has set up lending facilities to help member countries over the shocks.

Overall however, emerging economies look set to post strong growth which will support flows of foreign direct and portfolio investment, according to a study by Goldman Sachs.

After growing at six percent in 1996, the crises in Asia, Russia and Brazil in 1997 and 1998 slashed net capital inflows to emerging economies to around half the $330 billion peak reached in 1996, according to Goldman.

"While still subject to a high degree of uncertainty, the outlook for emerging economies is likely to improve in 2000," Goldman said.

It expects the global economy to grow an inflation adjusted 3.0 percent, which will boost exports from emerging market economies three-fold to six per cent in 2000 from this year, further increasing commodity prices and thus allowing emerging countries to see an improvement in their terms of trade.

Goldman expects capital flows to rise $35 billion in 2000.

It notes that the appetite for holding emerging market currencies, measured by Goldman's Risk Appetite Index, has fallen sharply since June as investors now require 179 basis points of expected excess return per unit of risk to hold a basket of 25 emerging market currencies, compared with 69 bp at the end of June.

Appetite for risk is therefore at its lowest level since 1995, Goldman notes, lower even than on the eve of the Russian financial crisis of 1998.

"While risk appetite could easily decline in the run-up to Y2K, it would be surprising if such depressed levels were maintained throughout the year," Goldman said.