ANALYSIS-Can emerging economies stand alone as cash flees?

By Peter Apps

LONDON, Oct 1 (Reuters) - As western investors dump emerging assets, the fate of the sector's major economies will hang on whether Brazil, Russia, China and others such as Gulf Oil producers have built up enough funds to survive the storm.

Just months ago, many analysts argued the fast-growing sector had "decoupled" from the developed world. But a Wall Street-led rout has since hit stock markets from Lusaka to Bombay as western banks failed or needed bailing out.

Lehman Brothers' failure this month prompted the biggest withdrawal of cash from emerging stocks since fund monitor EPFR began records in 2002, and the sector benchmark .MSCIEF shows its worst quarter in a two decade history.

A decade ago, that would have devastated emerging economies but analysts and investors say this time the sector's heavyweights, also including India or the Gulf States, have enough cash to keep themselves in the black.

"Over the next five-to-10 years, emerging markets are still going to be a growth story and asset managers are going to be putting more money there," said Nigel Rendell, emerging markets strategist at Royal Bank of Canada.

"But in the short term people are going to be pulling money out."

That leaves emerging economies largely dependent on their own resources or those of their peers and neighbours. Will they be able to hold up domestic demand, maintain at least reasonable exports and keep the capital and liquidity flowing?

"I think at the moment people are finding it difficult to know where to put their money," said HSBC Halbis Frontier markets fund manager Andrea Nannini -- who has been increasing the position of his $240 million fund in the Middle East.