DESPITE a stormy period, emerging-market mutual funds continue to sprout like spring flowers.
Last month, both T. Rowe Price, in Baltimore, Md., and the Calvert Group, in Bethesda, Md., offered funds invested in emerging markets -- that is, in stocks from developing nations or nations with rudimentary stock markets.
T. Rowe Price rolled out its new ''T. Rowe Price Emerging Markets Stock Fund,'' which will invest in large and small companies in Asia, Europe, Latin America and Africa. Calvert Group announced its ''Calvert New Africa Fund,'' designed to seek out investment opportunities in the 55 nations of Africa.
''We see this as an excellent period for people wanting to invest in emerging markets,'' says Steve Schueth, executive vice president of Calvert Group. ''The new fund also provides investors with the opportunity to be involved in [the] empowerment'' of the people of Africa, particularly South Africa, Mr. Schueth says.
The African fund so far has only about $250,000 in assets, all invested in companies in South Africa and Ghana, according to Justin Beckett, president of the fund. As its assets build, the fund will invest in companies throughout Africa, says Mr. Beckett.
The new T. Rowe Price fund has drawn in slightly under $4 million in assets. It has already put money into overseas equities, particularly in Asia and Latin America. In April, the fund posted a return of 4.6 percent, notes spokesman Steven Norwitz.
For investors with a bit of fearless grit, investing in emerging-market funds can be highly profitable over time.
By comparison, in the United States, the total compounded average annual return for Standard & Poor's 500 index over the 10 years ending Dec. 31, 1994 was 14.34 percent.
It can also be highly risky. Political instability, currency fluctuations, high inflation, and limited regulatory oversight at times have affected fund shares invested in developing nations. Many investment advisers say average investors should not put more than 5 to 10 percent of their total financial portfolio in international stocks in general -- a percentage that could include some emerging-market issues.
Still, in 1993 alone, US investors poured $4.5 billion into emerging-market funds. Returns in some cases were spectacular, hurtling into double digit ranges. Many of those same investors were badly burned in 1994, as a number of overseas markets tumbled downward or gyrated wildly, dragging fund portfolios with them. The collapse of the Mexican peso in December 1994 helped sink a number of Latin American markets.
The good news, analysts say, is that some emerging markets show modest signs of turning back up. Since stock prices in many third-world nations are down, this may be a ''buyers market'' for investors, some enthusiasts say. But it also could be that some emerging markets could drop further.
''Many of our international funds did very well in April,'' says Mr. Norwitz, of T. Rowe Price.
Morgan Stanley Capital International, an investment-research firm in New York, reported that the majority of world equity markets turned up in April, including emerging markets. Morgan Stanley's Emerging Markets Free Index (EMF), was up 4.3 percent in April, spurred by market gains in Latin America and the Middle East. Still, the EMF Index remains down 9 percent for the year through April.
The case for buying emerging markets stocks is twofold:
1. Emerging markets will continue to post higher overall average economic growth rates than will developed nations during the remainder of this century. Stock prices should move upward in tandem with economic growth.
2. Emerging-market stocks might help offset declines in US stock values. ''We're concerned about a possible market correction in the US now,'' says Walter Frank, chief economist with IBC/Donoghue Inc., a research-publishing firm in Ashland, Mass. ''A US market correction could even be a little worse than some people are expecting. So international issues are now looking even better to us at this time.'' Among emerging markets, Mr. Frank likes Southeast Asia.
Most major families of mutual funds now have funds specializing in emerging markets. Among the best- known fund families are Templeton and Fidelity. Emerging-market funds can be purchased in different packages: a general fund, such as T. Rowe Price Emerging Market Fund; a regional fund, such as Fidelity's Latin America Fund or Calvert's New Africa Fund; or an area or country fund, such as United Services Funds China Region Opportunity Fund.
The safest emerging-market funds, experts say, are the ''general'' funds, since they are globally diversified. The least safe are single- country funds. Ask anyone who put a lot of money into the Mexican market a year ago.