Stronger emerging economies are likely to pull further ahead from weaker peers following the moves by global leaders to augment the lending capacity of the International Monetary Fund.
Emerging markets were the focal point of the Group of 20's $1.1 trillion blueprint to revive the global economy announced on Thursday, including a tripling of IMF resources.
The increase in IMF firepower comes on the heels of a newly created flexible credit line facility that is expected to boost investor confidence in stronger emerging-market names.
Countries that are already doing well will benefit the most as the new facility gives them better access to IMF money, insuring them against contagion effects from weaker emerging economies, said Lars Christensen, head of New Europe research at Danske Bank in Copenhagen. For economies that are already in bad shape, not much will change.
Unveiled in March, the new credit line is designed to give well-run economies access to IMF money that can be either tapped immediately or kept as a guarantee in case international financial conditions worsen.
With its revamped borrowing conditions, the new facility has lessened the stigma attached to IMF financing as a sign of economic distress.
Mexico, which has an investment grade credit rating, on Wednesday was the first country to take such a credit line.
News it had secured $47 billion in contingency funds drove its peso currency more 2 percent higher against the dollar.
Brazil, Indonesia, Poland, South Africa and South Korea are seen as possible candidates for the new facility.
It's no longer perceived as going to the IMF with a begging bowl but it will be more like taking out a precautionary bank overdraft, said Nigel Rendell, RBC Capital Markets senior emerging markets strategist.
The boost of IMF reserves to $750 billion -- a centrepiece of Thursday's summit in London -- is particularly crucial for emerging Europe where the fallout from the global financial crisis has been arguably the most severe.
In the last six months alone, the IMF has pledged over $60 billion in loans to the region, with Hungary, Latvia, Romania, Serbia and Ukraine among those with programmes.
Turkey is expected to sign a deal for a loan expected at some $25 billion while Lithuania has said it could also turn to the Washington-based lender to help balance its public finances.
Emerging Europe is the region with the greatest need for IMF money, said Dresdner Kleinwort forex strategist Jon Harrison. The G20 has provided a boost to the region overall but markets are not going to forgive individual countries that have failed to address their domestic problems.
G20 optimism sent emerging equities up over 5 percent on Thursday and lifted central European currencies. But on Friday, emerging Europe lagged share gains in the Asian session while most of the region's currencies fell versus the euro.
The extra (IMF) funds do not change the fact that we are likely to see a very sharp further correction in growth in the region....The IMF will still demand significant fiscal adjustments to provide loans to central and eastern European countries, said Danske's Christensen.
YEARS, NOT MONTHS?
IMF payments to Ukraine and Latvia have been held up in recent weeks over the failure of these countries to stick to terms of their funding package.
The depth of fiscal adjustments required for emerging Europe where household and companies gorged on foreign currency loans during the boom years will continue to give investors pause.
BNP Paribas and UniCredit are among those that see emerging European currencies underperforming global emerging peers, though Brown Brothers Harriman sees possible resilience in the Polish zloty , which it says could qualify as a candidate for the IMF's new facility for good countries.
Some countries on the IMF's programmes appear to be stumbling in their efforts to restructure their economies.
Hungary has said it may seek a second IMF package after securing $25 billion in international bailout loans in October.
There is a risk that the recovery process is prolonged as a result of the IMF -- that countries are left on programmes for years instead of months, RBC's Rendell said.
Client countries such as Latvia have been allowed to keep their currency peg, blamed for hampering the pace of economic adjustment.
The IMF last month agreed to disburse a tranche of its loan programme to Hungary, acknowledging that the original target for a 2009 budget deficit could be missed because of additional state spending to safeguard social programs.
The IMF alone won't bring international investors back, Rendell said.