Emerging markets were standouts in 2010 with some of the best stock picks, although not every BRIC market outperformed the S&P 500. However, if you look at the USD-returns of the MSCI country indexes, they can be quite different than the local benchmark indexes.

For example, you see that my favorite, India, returned 19.4% in 2010, while Russia returned 17.2%. Russia had been pulling away from the BRIC pack in December, as it is a clear beneficiary in the surge in commodity prices. Should this surge continue in 2011 — we are experiencing a sharp correction at present — Russia should keep outperforming.

Brazil is a little misleading as its MSCI index returned only 3.8% despite the surge in commodity prices. Still, this is probably because Petrobras (NYSE: PBR), the largest company in Latin America, pulled the MSCI Index down. Petrobras had to figure out the financing for its deep-sea oil discoveries, which is why it underperformed the Energy Select Sector SPDR (NYSE: XLE), as well as the price of oil itself in 2010.

The stock has been rising on good volume in December with a surge in oil prices. The higher oil goes, the better for Petrobras, as the cost of developing those deep-sea oil finds will be probably very high on a per-barrel basis, yet it is still uncertain. A better measure of the surge in the Brazilian market is the broader Market Vectors Brazil Small-Cap ETF (NYSE: BRF), which was up 25.3%.

Due to increased monetary tightening measures on the Chinese economy, the MSCI country index returned only 2.3%. Still, small-cap stocks again tell a different story as the Guggenheim China Small-Cap ETF (NYSE: HAO) returned 16.1%. I expect that the tightening measures will be removed by mid-2011 at the latest, at which point we should see Chinese shares play catch-up with the global rally. The Chinese economy is growing at a breakneck pace, while stocks in the aggregate have not done much. This can last for a while, but not for long if my thesis of a soft landing in China materializes. China should be surprisingly strong in the second part of 2011.

Most markets near the top of the ranking are commodity-oriented. Thailand is an outlier as it had lagged for some time, but as investors understood that the economy was on a firm footing even without former Prime Minister Thaksin, they decided to play catch-up. But Peru, Chile, Colombia, Malaysia, Indonesia and South Africa are all driven by natural resources to varying degrees. They offered some of the highest average annual returns in the past decade, and they are likely to do so in the next 10 years.

With China being the largest consumer of natural resources, it is easy to see why those commodity-oriented markets are doing well. China certainly is not the only reason for this boom — there have been numerous and extensive reforms carried out in Latin America in the past decade — but as the fastest-growing major economy, it will play an ever-larger role in the economic development of the region.

Investors interested in China should keep Latin America on their radar screens.