Additionally, the strengthening commodities market, notably metals prices, also contributed to a rebound in emerging market currencies.

However, the emerging markets are still vulnerable to certain risks, namely a sudden interest rate hike from the Fed if the Chinese economy and other developing economies find a stable footing.

“One is that if China’s growth does indeed recover somewhat it would increasingly remove a key reason behind the Fed’s delay at the September meeting,” Credit Suisse added. “The stronger and sooner the Chinese recovery, the more the market will have to pull forward Fed hikes and increase pricing of the terminal rate, in our view.”

Investors can also hedge against a pullback in the emerging markets through inverse ETF options. For instance,  the ProShares Short MSCI Emerging Markets (NYSEArca: EUM) takes the inverse or -100% daily performance of the MSCI Emerging Markets Index, the benchmark to EEM. The ProShares UltraShort MSCI Emerging Markets (NYSEArca: EEV) follows the -2x or -200% daily performance of the Emerging Market Index. Additionally, the Direxion Daily Emerging Markets Bear 3x Shares (NYSEArca: EDZ) tracks the -3x or -300% performance of the benchmark. [Expert Bears Down On Emerging Markets]

iShares MSCI Emerging Markets ETF

For more information on the developing economies, visit our emerging markets category.

Max Chen contributed to this article.