GLOBAL - Institutional investors are warming increasingly to emerging markets, but some fear a number of asset classes there could overheat in the coming months, according to the Economist Intelligence Unit (EIU).

The EIU's white paper on the opportunities and risks in emerging markets found that 27% of the 800 institutional investors surveyed believe the assets offer the best potential for growth over the next 12 months.

However, 57% said that while those assets had "very strong" growth potential, they were concerned markets could overheat.

For a quarter of respondents, real estate posed the biggest risk of an asset price bubble. In last year's survey, less than 20% held similar views.

The EIU's white paper said countries like China were particularly exposed, as investors were still more optimistic about the country's economic growth over the next 12 months than they were about asset growth.

For example, the China Real Estate index shows that, in February this year, housing prices in 100 major cities fell for the sixth consecutive month, mainly due to the government's "deliberate" policy to limit speculators in the property market.

As a result, even though only one-third of the investors surveyed said a crash in the Chinese housing market would be likely to occur over the next 12 months, 66% conceded that such an event would have a negative impact on their portfolio.

However, Steffen Bassler, director at Credit Suisse Securities (Europe), noted that a housing bubble in China would be unlikely to have the same impact as the one recorded in the US in 2007-08, as the Chinese market was far less globally connected.

The EIU also pointed to growing concern among institutional investors over a possible bubble in bond markets. Approximately 8% of respondents said that such an event was likely to occur in the sector.

By comparison, just 4% expected "overheating" in last year's survey.

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