Dec. 19 (Bloomberg) -- Emerging-market stocks are a better buy than those of more developed regions because their economies will rebound more quickly from the global slowdown, according to Jonathan Garner, a strategist at Morgan Stanley.

“We subscribe to the last-in-first-out school of thought,” Garner, who heads the global emerging-markets strategy team from London, said in an interview. “Emerging markets were the last to drop and will pull out the fastest.”

As the CHART OF THE DAY shows, MSCI Inc.’s index of emerging-market stocks beat the developed-market gauge from the start of last year’s fourth quarter, when the U.S. economy began to contract, to August. The emerging-market index fell faster for the next two months as recessions in the U.S. and western Europe dragged down growth in China, Brazil and Russia. Since October, emerging-market stocks outperformed again, a trend Garner says will continue next year.

Developed economies sparked the global slowdown last year as the U.S. housing market’s collapse saddled banks with bad mortgages and reduced consumer spending. Emerging economies will recover faster because many have lower levels of household debt and the ability to fund investment without borrowing, according to Garner.

“It’s very encouraging that since the end of October the tendency to outperform has re-asserted itself,” he said.

To contact the reporters on this story: Laura Cochrane in London at lcochrane3@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net.

Last Updated: December 19, 2008 07:32 EST