China, the U.S. Federal Reserve and a possible Donald Trump presidency are the key risks overshadowing a positive outlook for emerging markets, according to an emerging markets strategist at $1 trillion asset manager Amundi.
Abbas Ameli-Renani, a global emerging market strategist at Amundi, said the firm, which is Europe's biggest asset manager based on assets under management, was generally upbeat on the outlook for emerging market assets.
But he said there were three factors that slightly clouded the horizon for emerging markets.
A Trump presidency
The Trump risk that Ameli-Renani was most concerned about was that the market would turn too bearish on emerging market assets if the Republican candidate were to win the U.S. presidency in the November election.
"Trump's rhetoric is protectionist, and export-oriented emerging market economies would likely trade with a negative beta in the case of a Trump victory," he said.
But he added, "One positive aspect for risky assets that would result from a Trump presidency is that the first thing the market does is price out Fed rate hikes. This is a central bank that looks for excuses to be dovish and what better reason not to hike than a huge amount of uncertainty in terms of policy-making going forward."
He expected such a Fed move would drive strong performance in high-yielding emerging assets, particularly in countries with domestic drivers of growth. Additionally, Ameli-Renani expected Russia would be a large geopolitical beneficiary of a Trump presidency.
Ameli-Renani did note, though, that Trump faced "an uphill battle" for the White House, with the chances of a win even less likely after events over the past week. Video emerged at the weekend of Trump using lewd language to describe women and boasting about touching them without their consent.
China
Of the three risks he identified, China was the key medium-term risk to EM assets, Ameli-Renani said, but added that Amundi saw it as more of a "tail"or outlier risk, than its base case.
Ameli-Renani noted that the "relentless" increase in China's private-sector debt to around 200 percent of gross domestic product (GDP) was concerning, both because of the pace of the rise and because the debt was becoming less efficient, with each "unit" of debt producing less growth.
But he identified two mitigating factors.
"The bulk of the debt is domestic. This is a country still running a large current account surplus, a country with 14 percent net foreign ownership of assets and this reduces the vulnerability of China quite significantly," he said.
"Secondly, the bulk of debt in China is quasi-sovereign debts. These are corporates that are partially owned by the sovereign. If there is one sovereign in the world with the strength of the balance sheet to internalize that risk, we think it's the Chinese sovereign."
Ameli-Renani also noted that while China's economic growth was expected to slow, , while fairly stable against the dollar over the past few months, had dropped about 10 percent against the basket of its trading partners' currencies. That should provide a "meaningful" boost to exports and cushion any growth slowdown, he said.
The Federal Reserve
Amundi was concerned that the market might not be pricing in enough Fed tightening, with the markets only pricing in expectations the U.S. central bank will hike once this year and once next year.
"We are concerned about the likelihood of the Fed surprising to the hawkish side in the near term," Ameli-Renani said.
But he also played down the scale of the risk.
"Normalization of policy rates in the U.S. is not a new theme. We've been talking about this at least since 2013," he said, noting that the Fed had already hiked once in December 2015. "This is not something like we are at the edge of the apocalypse and we have no idea what's going to happen."
A combination of the three risks helped to drive Amundi's underweight stance on low-yielding debt in the countries most exposed to China growth: South Korea, Singapore, Thailand and Taiwan.
"Our key tail risk is China so we want to have protection against such a risk and also in the case of a Donald Trump presidency," Ameli-Renani said, pointing out that much of the Republican presidential candidate's rhetoric had negatively targeted China.
"These countries have not meaningfully priced in a Trump risk, so we think being underweight this region protects us both against China risks and against Trump risks, in addition to not providing any yield," he said.
Correction: This report has been updated to reflect that Abbas Ameli-Renani is a global emerging markets strategist at Amundi.
Follow CNBC International on Twitter and Facebook.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1