Emerging Markets Gain Record Share of World Equity (Update2)
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By Michael Patterson and Laura Cochrane

July 3 (Bloomberg) — Developing countries’ share of worldwide equity value climbed to a record as the fastest- growing economies lured stock investors amid the first global recession since World War II.

The 22 nations classified as “emerging” by index provider MSCI Inc. comprise 24 percent of world market capitalization, up from 18 percent at the start of this year, the highest proportion since Bloomberg began compiling the data in 2003. China shares topped $3 trillion yesterday for the first time since August, from $1.8 trillion at the end of last year.

The increase signals growing confidence in developing countries as equity investors redeploy cash after the worst losses last year since the Great Depression. Stocks rallied from Sao Paulo to Shanghai in 2009 after policy makers cut interest rates and enacted stimulus plans to cushion economies from lower exports. The MSCI Emerging Markets Index rose 35 percent, while the MSCI World Index of developed economies added 2.9 percent.

“Everyone is trying to jump on that bandwagon,” said Nicholas Field, who helps manage about $11 billion in emerging- market stocks at Schroders Plc in London. “There are projects in emerging markets in which I can make more money than I can in the West at the moment.”

Developing economies will probably expand 1.6 percent as a group this year and 4 percent in 2010, according to the Washington-based International Monetary Fund. Developed nations will contract 3.8 percent in 2009 and have zero growth next year, the IMF forecast in its April World Economic Outlook report.

China Stimulus

The MSCI Emerging Markets Index was little changed today, dropping 0.02 percent at 10:25 a.m. in London.

Investors poured a record $26.5 billion into developing- nation stock funds in the second quarter, with China receiving $3.8 billion, according to data released yesterday by EPFR Global. The funds overall attracted $972 million in the week ended July 1, resuming net inflows after the first decline since March the previous week, the Cambridge, Massachusetts-based research firm said.

China’s market capitalization has jumped more than fivefold from about $500 billion at the end of 2003, according to Bloomberg data that includes common and preferred stock. The Chinese economy more than doubled in that time to $3.8 trillion, according to the World Bank. The world’s third largest economy after the U.S. and Japan has been boosted by a 4 trillion-yuan ($585 billion) stimulus package and five reductions to the key one-year lending rate in the last four months of 2008.

To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net. Laura Cochrane in London at lcochrane3@bloomberg.net

Last Updated: July 3, 2009 05:28 EDT