Emerging markets are shaking off last year's rout, but it isn't clear if the rally has staying power or if it's just a flash in the pan.
"Investors were overly negative on emerging markets and it was a crowded short," Citigroup said in a note Monday. "Some of those shorts have now been unwound."
It isn't clear if those trades will stay unwound.
"It remains fashionable to be bearish on emerging markets," Citigroup said. "Less than a few weeks ago, the questions were still all about an emerging market blow up, banking crisis, currency collapse, and earnings disappointments. Now that emerging markets [have] rallied off the lows, the perception is that it is clearly not sustainable."
Over the past two weeks, emerging market bond funds saw $2.85 billion worth of inflows while around $4.80 billion has flowed into emerging market stock funds over the past three weeks, although the two segments have still seen net outflows of $9.33 billion and $25.55 billion respectively so far this year, according to data from Jefferies.
In 2013, $14.1 billion exited emerging market equity funds, while $14.04 billion said good-bye to the segment's bond funds, according to data from Barclays.