‘Enormous Momentum’

The U.S. Citigroup Economic Surprise Index, a measure of how much reports are exceeding economists’ estimates, rose to a two-month high on March 14 while the gauge for emerging markets shows reports have trailed projections since January.

“The U.S. has been delivering,” said Russ Koesterich, the chief investment strategist at New York-based BlackRock Inc., the world’s largest money manager with $3.8 trillion in assets.

Not all emerging markets are losing. Thailand’s SET Index has surged 73 percent since the current global rally began on Oct. 4, 2011, while the Philippine Stock Exchange Index rose 70 percent. The Thai economy may expand by as much as 5.5 percent this year and the Philippines will probably grow at least 6 percent, according to government estimates. Economists surveyed by Bloomberg predict a 1.9 percent expansion in the U.S.

“These are emerging markets and they have flaws,” said Byron Wien, vice chairman of the advisory services unit at Blackstone Group LP, the world’s largest manager of alternative assets such as private equity. “They also have enormous economic momentum and the developed markets are mature and the momentum is not as pronounced.”

Lower Debt

Wien said emerging markets will lead gains in global stocks this year with “double digit” returns.

Developing nations are becoming safer bets by some measures. Government debt has declined to 34 percent of gross domestic product from 52 percent a decade ago, according to the Washington-based International Monetary Fund. That compares with 110 percent in advanced countries.

Emerging markets have more than $6 trillion of foreign exchange reserves, data compiled by Bloomberg show. The extra yield investors demand to own their sovereign bonds over U.S. Treasuries has narrowed to 3 percentage points, or 300 basis points, from an average of 371 during the past five years, according to the JPMorgan EMBI Global Index.

“Relative to Europe and Japan, emerging markets do not have the same indebtedness problem,” said David Kelly, who helps oversee about $400 billion as the New York-based chief global strategist at JPMorgan Funds.