Easing monetary policy "has often been a good signal that it's time to allocate more to emerging stocks," James Paulsen, who helps oversee about $333 billion as chief investment strategist at Wells Capital Management in Minneapolis, said in a Nov. 7 interview on Bloomberg Television.

Lower borrowing costs have reduced the attractiveness of some emerging-market currencies, fueling faster inflation and higher foreign debt servicing costs. Turkish policy makers, who cut interest rates to a record in August, doubled some borrowing costs for banks on Oct. 26 after inflation accelerated to the fastest pace in a year. Hungary may boost interest rates to support the forint after its slide to an all-time low made foreign-currency debt more expensive, Stockholm-based Nordea Bank AB wrote in a Nov. 11 research report.

China Boosts Growth

Europe's debt crisis may weigh on emerging markets should the region's banks reduce lending to preserve capital, said Myles Zyblock, the chief institutional strategist at RBC Capital Markets in Toronto. Yields on Italy's government debt jumped to the highest level since the euro's introduction in 1999 this month, while the country's banks increased borrowing from the European Central Bank in October.

European lending of $3.4 trillion to developing nations is almost triple credit from U.S. and Japanese institutions combined, according to Bank for International Settlements data through March 2011.

"If the lending wheels in Europe seize up, you're going to see a lot of activity slow in emerging markets," Zyblock said in a Nov. 10 interview on Bloomberg Television.

In China, the biggest developing economy, policy makers are acting to bolster growth even after leaving the key lending rate at a three-year high of 6.56 percent since July. The central bank has pumped cash into the financial system this quarter and new lending by the country's banks jumped by more than analysts forecast in October. Inflation has dropped for three straight months, according to government data.

Reversing Positions

China's economy grew at a 9.1 percent annual rate in the third quarter and the International Monetary Fund estimates it will expand 9 percent in 2012. That compares with a 6.1 percent growth forecast for developing nations and 1.9 percent for advanced countries, the Washington-based fund said in September.

"The market may be poised to continue to shift from the pricing in of hard landing scenarios to the pricing in of some policy-driven relief and reacceleration," Noah Weisberger, a strategist at Goldman Sachs, wrote in a Nov. 6 e-mail. The New York-based bank advised clients to bet the Hang Seng China Enterprises Index will beat the Standard & Poor's 500 Index.

The MSCI emerging-market index outperformed the MSCI World gauge by an average 20 percentage points in 12 months after interest rates peaked in Brazil, Russia, India and China, known as the BRICs, according to data compiled by Bloomberg since 2003.

Earnings Climb

Technology companies, automakers and retailers led the advance as interest rates began falling in 2008. Samsung Electronics Co., the Suwon, Korea-based maker of semiconductors and smartphones, Dongfeng Motor Group Co. of Wuhan, China, and Cia. Hering, the Blumenau, Brazil-based clothing retailer, all climbed more than 50 percent in 12 months.