Emerging market economies are projected to perform better this year than the developed economies. Based on the year-to-date (YTD) performance of the foreign stocks trading as ADRs in the US, it appears that the above estimate might come true.

The Bank of New York Mellon Asia ADR Index is down 15.25% YTD and the Bank of New York Mellon Latin America ADR Index is off 4.12% YTD. However the Bank of New York Mellon Europe ADR Index is down 19.68% and the Bank of New York Mellon Developed Markets ADR Index is off 18.74%. These two indices are performing worse than the Asian and Latin American Indices.

As seen above, the Latin American ADRs are leading the Asian ADRs by a significant margin. In fact, the ADR indices for Brazil and Chile are in the positive territory YTD with returns of 0.23% and 9.08% respectively. However Argentina, Mexico and Colombia have fallen by double digit percentages. These impact of these losses are lessened by the performance of Brazil and Chile helping the regional Latin American ADR index to beat the Asian index.

Of the Asian ADR Indices, China and India are off 14.27% and 21.44% so far this year. The Korea ADR index has fared worse among the Asian countries with a loss of nearly 28%.

This year there will be strong competition among emerging economies to attract international capital. According to the “Capital Flows to Emerging Market Economies” report released by The Institute of International Finance, Inc. the net private flows will be” $165 billion this year, after an estimated $466 billion in 2008, which compares with the record 2007 volume of $929 billion. ”

The net private capital flows into the emerging markets in 2009 is projected to be:

Emerging Europe = $30 B
Latin America = $43 B
Asia = $65 B

The overall growth in emerging markets will be 2.7% this year compared to 5.7% in 2008.

Chart – Net Private Capital Flow to Emerging Markets (as a % of GDP):