More investors venture into third world. GLOBAL MARKETS

Less and less of the world map is being designated ``terra incognita'' by investors. This is especially true in Asia. The Four Tigers - South Korea, Taiwan, Hong Kong, and Singapore - are being joined by the feisty cubs of Thailand, Malaysia, and the Philippines. And even a few of the heavily indebted nations in Latin America are beginning to attract the money of more daring investors.

Since June, Morgan Stanley & Co. has been tracking the stock markets of seven promising countries. Mark Sladkus, publisher of Morgan Stanley Capital International, says he is ``convinced this will be the next wave'' of investment diversification.

The nations that Morgan Stanley follows in its Emerging Markets Free (EMF) index are Argentina, Chile, Jordan, Malaysia, Mexico, the Philippines, and Thailand. Since the beginning of this year, the EMF index has outperformed all other regions - although within the EMF there are big winners such as Argentina and losers such as Jordan. (See table.)

``Over the last year and a half the interest in emerging markets on the part of sophisticated investors has been growing,'' Mr. Sladkus says. ``We have chosen countries that are likely to grow faster than mature countries.''

These seven nations were selected because of market capitalization, liquidity, and openness to foreign investment. Emerging markets are very risky, however. But with megabuck portfolios throughout the world invested in the same universe of United States, Japanese, and European blue-chip companies, emerging markets offer the possibility of beating the average.

Right now, Southeast Asia appears to be the surest thing in emerging market investing.

Vickers da Costa, a 100-year-old British brokerage with a reputation for expertise in out-of-the-way markets, sees Thailand as an especially good investment prospect. Patrick Allen, who follows Southeast Asia from Vickers's New York office, notes that Thailand is receiving the same sort of huge Japanese investment today that spurred on South Korea in the late 1970s. Taiwanese money, too, is flowing into Thailand. The political scene is stable. The work force is skilled and relatively inexpensive.

Next on Mr. Allen's list are stocks in Malaysia and the Philippines. Prices for Malaysian commodities such as palm oil, rubber, and tin are near their all-time highs, and the government has reopened the economy to foreign investment. In the Philippines, the political situation appears to be stabilizing, and the low-cost, English-speaking labor market is attractive to foreign industries. In both nations, Japanese and Taiwanese investment are growing rapidly.

The biggest plus for these three emerging Asian markets is Japan's stimulation of its domestic economy. Imports from throughout Asia are pouring into Japan. Trade figures from Tokyo this week show Southeast Asian imports rose almost 27 percent in July compared with July of '87. But according to some specialists on emerging markets, even the Asian tiger cubs are yesterday's story.

Steve Hanke, a professor of applied economics at Johns Hopkins University in Baltimore and director of the Toronto-based Friedberg World Advisory Service, manages a portfolio of investments in Chile. He considers the Chilean market the ``hottest in the world - it's where the Asians were 10 years ago.''

Chile has rapidly privatized state-owned enterprises, liberalized its economy, and cut taxes. Price-earnings ratios in Chile are still a modest 6 or 7 to 1 on average, meaning that stocks are undervalued compared with the US, Japanese, and most European markets. Moreover, capital flight, which is such a problem elsewhere in Latin America, has been reversed. Chile's strength, Dr. Hanke says, stretches back to the mid-1970s.

But the best performer on the Morgan Stanley index this year has been Argentina, up 88.4 percent since Jan. 1. Juan Jos'e Fern'andez-Ansola, a specialist on Argentina with Data Resources Inc. in Lexington, Mass., attributes this to several factors - not all of which bode well for Argentina in the future.

The government cleared the way for swaps of foreign debt for equity this year. That benefited the Argentine market. Argentines, Mr. Fern'andez-Ansola says, ``felt that would be good for all other investments. Low-priced assets were bid up during the swaps. That brought people into the market.''

He notes that the stock market has also served as a haven for investors trying to shield themselves from inflation. With an inflation rate at about 26 percent and interest rates about 21 or 22 percent, stocks are more attractive than fixed-income investments. Ironically, says Fern'andez-Ansola, ``inflation generates a transfer of funds to the stock market.'' That doesn't happen in most other markets, and it may be short-lived in Argentina.

He also believes that the stock market has been stimulated by a Latin phenomenon called desagio. This is the government's practice of suddenly halting high inflation and bringing it down to zero overnight. The practice is good for debtors and bad for savers; hence taking refuge in stocks makes sense.

But again, the stock market is benefiting during an essentially negative economic episode. If the economy remains shaky, the stock market will eventually feel it.

Similarly, Mexico, where the stock market rose 61.3 percent from the first of the year, is now in a tough period. In recent months the market has plunged and capital flight increased.

The Mexican financial markets are not keeping up with inflation, and exports are being hurt by the current value of the peso, says Javier Murcio of Data Resources. Mexico's traditionally strong export industries - those that make construction materials, chemicals, and steel, primarily for the US market - have been having difficulties lately.

Until the peso is devalued, these problems will persist, Mr. Murcio says. ``The time is ripe for a financial correction.''

The developing world is filled with such risky opportunities. The most important word to remember about emerging markets, say old hands in this business, is ``volatility.'' Gains could be big. Losses could be big, too. Since small nations are subject to political and economic buffeting, each month can bring a reversal in fortunes.

Investing in these markets takes a knowledge of exchange rates as well as stocks. Thus, the most prudent route is to go with an investment trust, a mutual fund, or an experienced brokerage such as Vickers. Even that is no guarantee. The fortunes of one mutual fund that specializes in emerging markets show that investors must be prepared to buy and hold long into the future.

In early 1987 the Templeton mutual fund group, based in St. Petersburg, Fla., launched Templeton Emerging Markets Fund Inc. It is a closed-end mutual fund with about $100 million in assets. From July '87 to July '88, the fund lost 3 percent of its net asset value and had a 3.1 percent dividend. Share value (it is traded on the American Stock Exchange) dropped 27 percent from July '87 to July '88.

That's pretty poor performance, although many funds were similarly hurt by the US stock market sag last year. If the developing world begins to recover and world stock markets remain on track, today's share value could be a bargain. But an investor must be prepared to weather the bad times.

Fund vice-president Ralph Layman says the task of identifying, buying, and holding good stocks in developing countries is laborious.

``We go stock by stock, company by company,'' he says. ``And we plan to hang on for five years or so.''