Rising global interest rates will diminish the attractiveness of bonds, but emerging markets' debt can still be a strong play for investors in the current climate, an analyst told CNBC Tuesday.
Michael Kushma, chief investment officer of global fixed income at Morgan Stanley Investment Management, told CNBC's "Street Signs" that Brazil, Columbia, Indonesia and Argentina are among the attractive emerging markets.
"Better global economic activity should be beneficial to emerging markets and potentially emerging market debt unlike developed market debt which should be hurt by that," he said.
"(We're) really looking for countries where fundamentals have turned the corner from bad performance to good performance, where trends in the fundamentals are good and where valuations are reasonable. They don't have to be cheap but they have to be reasonable relative to where they were," he added.
However, the strength in the U.S. dollar is a major risk for emerging markets, especially since both companies and governments have increased their U.S. dollar-denominated debt, said Kushma.
A Wall Street Journal report, citing figures from Dealogic, said companies and governments in emerging markets issued $179 billion of U.S. dollar-denominated debt in the first quarter this year – doubling the previous year's amount.
Kushma said that the corporate sector would be hit harder compared to governments should the U.S. dollar strengthen further.
"Strength in the dollar and slowdown in economy would be very bad for emerging market corporate sector, which has done a lot of borrowing, increasing their leverage in the last several years on the back of better economic performance and very low dollar interest rates," Kushma said.