Re-Emerging Markets Get Their Groove Back

WALL STREET JOURNAL -- As fears of a deepening global recession are pushed aside by expectations of recovery, investors have rediscovered their appetite for risk in places ranging from Brazil and China to Russia. Brazil's Bovespa stock index is up 75% since its October lows, and across the emerging-market world, stocks are up 50% since the beginning of March, according to the MSCI Emerging Markets index, which tracks 23 markets (see chart above).

Behind the optimism are signs the worst of the global slump may have passed, and that China's massive stimulus plan is kicking in, heralding a pickup in demand for commodities and agricultural products. Investors appear to be trying to get in early on a long-term bet: Emerging-market economies will get back into their grooves long before the U.S. or Europe shake off the global crisis.

Several emerging economies entered the crisis with better initial conditions and, as such, will likely maintain a better economic performance than most industrial countries going forward," says Mohamed El-Erian of Pacific Investment Management Co., manager of the world's biggest bond fund.

"I think it's an awareness of where the growth stories are coming from," says Jonathan Auerbach, managing director at international brokerage Auerbach Grayson. "We're about 12 months away from a genuine return to global growth, and it's going to be driven by the emerging markets."