Markets have rallied since the U.S. Federal Reserve held fire on interest rates, but that doesn't mean it's time to pile into emerging markets.
"It has been a Cinderella story for emerging market and resource stocks for several weeks," Nomura said in a note Wednesday. "But we think this will prove more of a short-term (multi-week) trade than a genuine EM inflection point with large 'real money' follow-through."
Leading up to the Fed's September 16-17 meeting, concerns that it would raise interest rates for the first time in nine years spurred a massive outflow of funds from emerging markets, including Asia's. But the Fed surprised markets by leaving rates unchanged and many analysts moved their forecasts for the next hike into 2016. That helped spur rallies in emerging market stocks and currencies, some of which had tested their lowest levels since the 1998 Asian Financial Crisis in the weeks previous.
The MSCI Emerging Markets index is up around 8.5 percent so far this month, although it remains down around 10 percent year-to-date.
Nomura advises selling into the rally, which it attributes to a combination of the delay in Fed "liftoff" and stabilization in China's economic data.
"Both may prove head-fakes beyond the next few weeks," the bank said. "Broadly across the EM space, we don't see much genuine value," it added, noting that the sector's price-to-earnings ratio is at a premium to historical levels, returns on equity have fallen below developed-market levels and earnings growth expectations also lag.
That is "begging the question as to why investors should take the additional risks inherent in EMs (e.g., political risk, FX volatility, governance shortfalls, lower liquidity) if not compensated by superior return generation," Nomura said.
Nomura isn't the only one not buying into the rally's staying power.
"The Fed is going to increase their rates at some point," Guillaume Chatain, head of equity solutions at JPMorgan private bank, told CNBC. "So this rally in markets because the Fed was not raising rates is something that we would recommend to fade at the moment."
Chatain prefers developed markets, saying he likes Japan for its earnings growth prospects and the possibility the Bank of Japan may introduce additional easing measures. He also noted that earnings growth in Europe appears set to top U.S. earnings growth this year, while the U.S. has good earnings visibility.
In a note last week, JPMorgan attributed the emerging market rebound to technical short-covering and advised investors not to follow it.