Fed Relief Turns Investors’ Focus to Emerging Economies in Bloom

The strength of a rally across developing nations after the Federal Reserve’s rate increase has become a riddle for global investors. But the answer may be simple: growth prospects.

While higher U.S. borrowing costs typically boost the dollar, policy makers were less hawkish than investors expected, sending the greenback tumbling and emerging-market assets soaring. That gave investors breathing space to revel in the prospect of faster U.S. growth — because when the world’s largest market takes off, it lifts the fortunes of countries worldwide.

“The global recovery is getting stronger and even Europe is showing some signs of life,” said Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki. “There was a little bit of weakening at the end of February, but investors are back in the game. This environment is good for risk sentiment.”

Developing-nation stocks are on longest winning streak in seven months, and



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