May 19 (Bloomberg) -- Stocks in developing countries advanced for a sixth day, erasing the MSCI Emerging Markets Index's 2008 loss, as rising oil and metals prices boosted equities from Mexico City to Moscow.

The index has rebounded 20 percent from its year low, leading the steepest rally in global equities since 2004, after the Federal Reserve's bailout of U.S. banks and a surge in commodity companies restored investor confidence in stocks. The Standard & Poor's 500 Index climbed 12 percent since bottoming on March 10, while Europe's Dow Jones Stoxx 6000 Index has added 15 percent since March 17.

PT Bumi Resources, Cnooc Ltd. and Gerdau SA led gains, helping the index rebound from a decline of as much as 16 percent this year. Petroleo Brasileiro SA, Brazil's state- controlled oil producer, surpassed Microsoft Corp. and Industrial & Commercial Bank of China Ltd. as the world's sixth- largest company.

``As long as we're seeing strong commodity prices, the implication is that the emerging markets are still growing,'' said Walter ``Bucky'' Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. ``The supply constraints in commodities are here for at least several more years, so these stocks should continue to do well.''

The MSCI Emerging Markets Index, comprising the world's fastest-growing companies, added 0.8 percent to 1,249.68. The index, which ended 2007 at 1,245.59, has quadrupled in the past five years. On average, companies in the measure trade for 16 times earnings, 22 percent higher than the monthly average since the start of 2002.

Prices Double

Bumi, Asia's biggest exporter of power-station coal, rallied 5.6 percent today, bringing its gain this year to 41 percent. The shares are at the highest in the company's 17-year trading history after Reuters reported the Jakarta-based company will sell coal to some Japanese utilities at more than double the 2007 price, citing Dileep Srivastava, Bumi's head of investor relations. Bumi's price-to-earnings ratio has almost doubled to 21.1 since its low in January.

Cnooc, China's largest offshore oil producer, added 3.4 percent in Hong Kong as crude reached as high as $127.82 in New York trading. A 62 percent increase in the company's first- quarter sales sent shares up 16 percent this year.

Gerdau rose 3 percent to 82.44 reais. Shares of Latin America's largest steelmaker have climbed 59 percent this year. The Brazilian Steel Institute said last week that domestic demand will climb at almost twice the worldwide pace as carmakers and construction companies expand production. Porto Alegre, Brazil-based Gerdau added 9 percent last week, its third-straight weekly advance. The stock now trades for 27.27 times Gerdau's earnings, 42 percent higher than at the start of the year.

Petrobras Value

Petroleo Brasileiro added 3.8 percent to 50 reais, bringing its market value to $287.7 billion. Microsoft, the world's largest software market, has a market capitalization of $279.3 billion.

MSCI's Emerging Markets Index has 937 stocks from 25 countries. The S&P 500, which fell as much as 13 percent, is within 3 percent of its level on Dec. 31, and the U.K.'s FTSE 100 Index is within 2 percent. The MSCI World Index, which tumbled 9.5 percent last quarter, rallied 13 percent since March 17. The biggest two-month gain since June 2003 left the measure 1.4 percent lower than at the end of 2007.

Mexico, Israel, Korea

The gauge of stocks in developing countries from Mexico to Israel and Korea dropped as much as 22 percent from its Oct. 29 peak as increasing bank losses and tightening credit standards threatened to slow economic expansion worldwide. Energy and raw- material producers gained 34 percent and 36 percent since the Jan. 22 low.

OAO Lukoil, Russia's second-biggest oil producer, is up 28 percent this year. The Moscow-based company added 13 percent last week after Prime Minister Vladimir Putin said a plan for oil industry tax cuts is ready for Parliament.

Capital International Inc., a unit of Los Angeles-based asset manager Capital Group Cos., raised $2.25 billion for private-equity investments in emerging-markets, according to a statement today. That's four times the size of its prior fund.

U.S. financial stocks jumped 13 percent in the past two months as the Fed's fastest interest rate cuts in two decades and support for the rescue of Bear Stearns Cos. helped banking companies battered by $343 billion of losses and writedowns from subprime-contaminated securities.

Fears Allayed

``Two months ago, you had the capital markets fearing the world was coming to an end,'' said Michael Strauss, the Wilton, Connecticut-based chief economist and market strategist at Commonfund, which oversees about $43 billion. ``By April, you could clearly argue that the Fed not only gets it, but they're doing creative things to address it. We're not getting that type of nasty recession that the markets were priced to.''

While the market capitalization of the 1,933 companies in the MSCI World Index is down about $712 billion in 2008, the losses narrowed from $4.49 trillion in March.

Valuations rose as investors bet profits will increase. The S&P 500 trades at 24.04 times the reported earnings of companies in the index, the highest since December 2003, according to data compiled by Bloomberg. Price-to-earnings ratios of the FTSE 100 and MSCI World indexes rose more than 15 percent since January.

``Money has been flowing back into riskier, more cyclical stocks and sectors really since the Bear Stearns bailout'' on March 16, said David Chalupnik, a Minneapolis-based senior managing director at First American Funds, which oversees about $62 billion. ``We're focused on trying to take advantage of that.''

Disposable Income

Companies in the S&P 500 that rely on consumers' disposable income, including retailers and automakers, topped analysts' first-quarter earnings estimates by 10 percent, the widest margin of 10 industry groups, according to Bloomberg data.

Mid-cap U.S. stocks capped a fifth week of gains on May 16, the longest streak of weekly advances in a year, and erased its 2008 loss on buyout speculation and better-than-estimated profit from retailers. The S&P MidCap 400 Index slipped 0.3 percent today.

Energy and raw-materials companies led the rally in global stocks since March as crude oil surpassed $120 a barrel and steel-sheet prices in America rose to a record $850 a ton.

U.S. Steel Corp. declined 0.6 percent to $180.22. The Pittsburgh-based company that's the second-largest U.S. steelmaker by market value rallied 74 percent since the S&P 500's low on March 10. Melbourne-based BHP Billiton Ltd., the world's largest mining company, surged 49 percent in London trading since the FTSE 100 bottomed March 17. Cia. Vale do Rio Doce, the world's biggest iron-ore producer, has gained 26 percent.

To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net; Michael Patterson in New York at mpatterson10@bloomberg.net.

Last Updated: May 19, 2008 16:46 EDT