With the risk of rising U.S. interest rates receding, now is the time for investors to end their underweight positions on emerging markets, Mark Mobius, executive chairman of Templeton Emerging Markets Group, told CNBC.
Mobius said emerging market bonds particularly looked attractive as companies were still paying healthy coupon rates at a time major central bank rates have slashed interest rates below zero or are at troughs.
One of the risks that drove funds out of emerging markets -- expectations of a more hawkish U.S. Federal Reserve -- appears to be fading. On Wednesday, the Fed cut its projection for the number of interest rate hikes it expects to make this year to just two from four and projected just two hikes in 2017. That was a more dovish move than was expected.
"Over the last three years, emerging markets have been hit by the threat of Fed increases. Now you have a situation where the Fed is hesitating and maybe even will cancel the idea of rate increases," Mobius told CNBC's Capital Connection. "So you have a situation where American investors and investors globally are beginning to think, wait a minute, U.S. markets are peaking, the U.S. dollar looks like it's peaked, maybe I should start diversifying out into other areas."