Fund Watch: Global Bargain Hunting

THE superpowers needed to save the world from this global recession don't include the ability to leap tall buildings in a single bound, nor do they involve building an arsenal of weapons. The heroes of this scenario are nations with little debt, lots of cash and millions of people willing to shop. And this time around, the U.S. appears to be little more than a sidekick.

The global financial crisis that nearly destroyed many developing economies in 1997 also gave them an incentive to get their house in order. Brazil, for instance, implemented stricter banking regulations, shrank its deficit and focused on reducing its dependence on the U.S. India and China have made similar strides. As a result, these countries are better positioned to weather today's crisis than most developed nations, analysts say. China, for example, is building roads and trains into the hinterlands, which will help develop a middle class and offset slowing demand from the West. Plus, China can more than pay for its infrastructure projects with the $1.6 trillion it has in cash and bonds.

What's more, nearly 80 percent of the world's population (much of that, youth) lives in emerging countries. As those youngsters age they'll be buying mobile phones, homes and many other products, just as Americans are retrenching and saving, says David Riedel, president of emerging-markets research specialist Riedel Research Group. That spending is significant: 31 percent of India's population is under 14, Riedel adds. That's 354 million future shoppers.

You don't have to look past last year to see that emerging markets are still risky: The MSCI Emerging Market index plunged 54 percent, laying waste to the notion that these economies are no longer tied to those of the developing world. Global economic forecasts have been slashed as even China faces a slowdown. But for the first time in 27 years, says Josephine Jimènez, manager of the Victoria 1522 fund, she is finding firms trading for less than what they would fetch at a liquidation sale: "It's a huge treasure chest." Some countries show more promise than others, so investors might want to consider a diversified fund with a seasoned manager, like Matthews Asia Pacific Equity Income (MAPIX), which regularly lands at the top of its category, and Templeton Emerging Markets (EMF) has legendary foreign investor Mark Mobius at the helm and no sales load.