Shanghai: Developing-nation stocks had the longest stretch of gains in two months last week, after a report showed investors are adding money to emerging-market funds on bets the global economy will keep expanding.

The MSCI Emerging Markets Index ended a nine-day rally with a 7.2 per cent gain at close on Friday in New York. South Africa's rand led gains in emerging-market currencies, strengthening 1 per cent versus the dollar as gold rallied to a record.

Emerging-market equity and bond funds received combined net inflows during the week to June 16 as concerns over European deficits eased, boosting the appetite for higher-yielding assets, EPFR Global data showed. European leaders pledged to publish stress tests to boost transparency in the financial industry, stoking speculation efforts to contain the financial crisis will succeed.

"Investors are looking to put more money into emerging markets," said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking. "Sentiment has changed to the positive after investors saw that the European debt crisis hasn't spiralled out of control."

The extra yield on developing-nation debt over US Treasuries dropped 10 basis points to 3.09 percentage points, according to JPMorgan Chase & Co. Brazil's Bovespa stock index fell 0.2 per cent, erasing an earlier gain, while the real advanced as a decline in metals prices overshadowed speculation that the stress tests will show Europe's banks are robust.

Russia, Hungary rally

MSCI's 21-country emerging markets index has dropped 9 per cent from this year's high on April 15 amid concern Europe's sovereign-debt crisis and China's efforts to curb real-estate speculation will derail the global economic expansion.

Emerging-market equity funds attracted $2.5 billion (Dh9.2 billion) in the period to June 16, while emerging bond funds received $659 million, fund tracker EPFR Global said in an emailed statement.

Russia's Micex Index rose 0.9 per cent after the country replaced China as Morgan Stanley's top pick among the largest emerging stock markets, according to a research report by the bank's London-based chief Asia and emerging-market strategist Jonathan Garner.

Hungary's BUX Index fell for a fourth day, weakening 0.2 per cent.

China's stocks fell the most this month as pharmaceutical, technology and consumer companies slumped.