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Power Play: Buy selectively in emerging markets

A Chinese denim factory
STR | AFP | Getty Images

Emerging markets are down 13 percent year-to-date following the collapse of commodities prices, but you can still make money there if you are selective.

Lisa Shalett, head of investment and portfolio strategies at Morgan Stanley Wealth Management, tells CNBC's "Power Lunch" on Tuesday while the broad EM equities asset class remains vulnerable to Fed tightening and U.S. dollar strength, the market is pricing in much of this risk.

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"We expect a rebound to commence in the next 12 months as weak EM currencies lead to better relative growth. We recommend selectivity: India, China H-shares, Taiwan and Korea," Shalett said.

She also sees an improvement in the outlook for commodities.

"We believe commodities are likely to perform better for the remainder of 2015 as global growth re-accelerates and the oil market comes into better supply/demand balance," Shalett said.

The Shanghai Composite closed lower on Tuesday, while the Taiwan and Korea Stock Exchanges ended higher.