Jan. 7 (Bloomberg) -- Emerging-market equity investors withdrew a record $48.3 billion from their funds in 2008 as the global financial crisis and economic recession hurt demand for riskier assets, according to data from EPFR Global.

Funds tracking Asia excluding Japan were the biggest contributors to outflows last year amid concern the region’s governments would struggle to battle inflation and support export demand, EPFR said. Losses were pared after a rebound in stock prices last month attracted $1.6 billion to emerging- market equity funds worldwide in December, according to Cambridge, Massachusetts-based researcher.

The MSCI Emerging Markets Index, which tracks 746 companies in developing nations, dropped 54 percent in 2008, the worst annual performance since the measure was created in 1987. The index has rebounded 33 percent since reaching a four-year low on Oct. 27 as governments from China to the U.S. unveiled spending plans to bolster economies. The measure fell 0.7 percent today, snapping a seven-day rally that was the longest-winning streak since April 23.

“The question for 2009 is whether credit markets will continue to thaw and whether all of the fiscal stimulus to come and the expectation of a recovery in economic activity later this year will be enough to coax some of the cash back into equity and bond exposure,” Brad Durham, EPFR’s managing director, said in the statement.

Coming Back

EPFR provides investment flow and asset allocation data globally and tracks funds with $10 trillion in assets, according to its Web site.

Money market funds drew a record $455 billion of inflows in 2008 as investors sought refuge in less-risky assets, the researcher said. They withdrew $321.4 billion from the equity and bond funds that it tracks, EPFR said.

Asian stocks rose today, tracking gains in the U.S. yesterday, on speculation President-elect Barack Obama’s $775 billion package of tax cuts and government spending will revive the economy. Central banks are also trying to boost economic growth after financial services companies incurred more than $1 trillion in credit losses and writedowns linked to the U.S. subprime market.

Economic growth in emerging markets will continue to outpace developed nations this year even as the global recession saps demand for raw materials and other exports.

Fundamentals Intact

The International Monetary Fund said on Nov. 6 emerging and developing countries will expand 5.1 percent in 2009, compared with growth in the global economy of 2.2 percent. The IMF has said a growth rate of 3 percent or less is “equivalent to a global recession.”

“The fundamentals for emerging markets haven’t changed and once the world economy stabilizes and the panic level subsides, a lot of these foreign funds will come back,” Tan Teng Boo, who helps oversee about $200 million at iCapital Global in Kuala Lumpur, said in an interview in Singapore. “The importance of the U.S. in the world economy has declined, so how can you ignore emerging markets?”

Asian stocks and exchange-traded funds posted $25.7 billion in outflows, making up more than half of the withdrawals from emerging-market equity portfolios last year, EPFR said. The region attracted $20.4 billion in 2007 while funds investing in the U.S., Japan and Western Europe lost $101 billion.

“The decoupling theme that took hold in the last quarter of 2007, of investors moving money from developed market funds and putting it into emerging market funds, came to an abrupt halt in early in 2008,” Durham added. “As the fear and panic in global markets deepened, investors took from most equity and </a> bond funds and stuck it in cash or cash equivalents.”

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net.

Last Updated: January 7, 2009 07:38 EST