Prudential has itchy trigger finger on emerging-market slump

Economic growth in emerging markets may be aided by a strengthening U.S. recovery, Keon said. He projects that real gross domestic product growth in the U.S. will average 3 percent to 3.5 percent over the next several years.

"Emerging markets are to a large extent high beta plays on the U.S. market," Keon said. "If we are right that economic growth in the U.S. turns quite strong, that's going to help a lot in China and elsewhere."

The Hang Seng Index of Hong Kong stocks rose less than 3 percent last year. Brazil's Ibovespa slumped 16 percent as the central bank increased interest rates to fight inflation. In Turkey, the Borsa Istanbul National 100 Index lost 13 percent. Mexico's benchmark slid 2.2 percent.

Blackstone Group LP's Byron Wien said yesterday in a statement that emerging-market investing "continues to prove treacherous." Stocks will rally in South Korea and Mexico, and equities in other developing nations will lag behind, he said.

John Praveen, chief investment strategist for Prudential International Investments Advisers, recommends a "modest" overweight position in emerging-market stocks, while underweighting U.S. stocks, according to a document distributed at the event. Investors should take a cautious approach to developing nations, he said.

"Almost everything that could go wrong did go wrong in the emerging markets," he said. "The wild card remains emerging markets. Growth is improving, but then there are too many uncertainties."

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