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There’s more room to run in emerging markets: Trader

There may be a way to win big in Brazil even after the Olympics come to an end this week.

Emerging markets are starting to outperform U.S. stocks, and the group could be headed for even bigger gains, according to one trader.

Things are starting to look brighter in emerging markets, said "Fast Money" trader Tim Seymour, and he doesn't think the advances will stop here. "You're seeing stabilizing economies and you're seeing stabilizing politics in places like Brazil," he said.

Emerging markets have seen double the performance of U.S. stocks since the Brexit vote in late June. The iShares MSCI Emerging Markets ETF is up about 10 percent, while the S&P 500 is up by about 5 percent. The ETF has about 25 percent of its assets in China, 14 percent in South Korea, 12 percent in Taiwan and 8 percent in both India and Brazil.

Seymour said that the iShares MSCI Emerging Markets ETF is at an inflection point. "This is the tail end of what has been an inverse head-and-shoulders rally in the EEM. Taking a look at this index, this is not just a one-month trade," added Seymour.

The move has been supported by strong emerging currencies, while the U.S. dollar has remained relatively flat, and record inflows into emerging market bonds. More than $25 billion has poured into emerging market debt so far this year as investors head abroad to search for yield while U.S. markets continue their slow grind to new highs.