"We expect reduced China growth anxiety will make emerging market equities the top-performing asset class in the second half of the year or until markets start re-pricing for the Fed's lift-off from the zero lower bound, which we think will trigger a volatility spike and increased investor risk aversion," Tim Condon, Head of Research and Chief Economist, Asia at ING wrote in a note.
The return of capital to emerging markets also reflects recent signs of stabilization in Ukraine and attractive yields and valuations. In May, emerging markets attracted $45 billion from global stock and bond investors, the highest level of portfolio inflows since September 2012, according to global financial industry group Institute for International Finance (IIF).
Emerging markets equities are up 3.9 percent year to date, slightly underperforming global stockswhich have risen 4.1 percent, according to the MSCI Emerging Markets and MSCI World indices.
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India and Southeast Asian markets have been the biggest beneficiaries, said Tai Hui, chief market strategist, Asia at J.P. Morgan Funds.
"Markets that were battered into 2013 are seeing a revival because of good policy from the central banks, as well as economic momentum is not as poor as people initially thought. So I think a lot of the oversold positions are now being bought back," he said.