Some analysts expect the recent rally in emerging markets to fade when the Federal Reserve finally hikes U.S. interest rates, the dollar renews its climb and China’s stock rebound cools off, Barron’s reports.

The MSCI Emerging Markets Index is up 12% since Sept. 29. The benchmark EM Index is still down 19% from its April highs and 29% since April 2011, but is 79% above the lows of the financial crisis, reached in October 2008, Barron’s reports.

“Emerging markets overshot reasonable valuations on the downside, and now there is a rebound,” Mark Mobius, executive chairman at Franklin Templeton emerging-markets group, tells Barron’s.

“Currency devaluations in many of the emerging countries went too far, as did some of the commodity markets, and are now recovering. The Fed delay in hiking interest rates has created a lot of uncertainty, and that has been generally a drag on all markets,” he says.

Many doubt that the rally will last. “The structural bear case for emerging markets has not suddenly changed,” says Kay Van-Petersen, strategist for Saxo Capital Markets. “It’s just [a matter of] when it starts to play out again.”

So where are the values now?

“We are finding great opportunities almost everywhere in the emerging world, particularly in China and Brazil,” says Mobius. The emerging-market guru still likes consumer stocks because of the rising per capita incomes across the developing world. He also sees opportunities in other sectors, such as the Internet and media, where valuations have come down substantially.

However, the International Monetary Fund has warned that the biggest risks to the global economy are now in emerging markets, where private companies have racked up considerable debt amid a fifth straight year of slowing growth, the Associated Press reported.

"We estimate that there is up to $3 trillion in over-borrowing in emerging markets," Jose Vinals, a top IMF official, said in presenting the body's Global Financial Stability report at its annual meeting.

He told reporters that an unprecedented lending spree has come to an end with the plunge in prices for oil, minerals and other commodities that economists attribute to China's slowdown.

The risk is that shocks from bankruptcies in the developing world's private sector, particularly in heavily commodities-dependent Latin American economies, could be amplified in global financial markets.

The worst-case scenario, said Vinals, is "a vicious cycle of fire sales and volatility."

Related Stories:

• Mobius: 'Now's the Time to Shift Out of the US Into Other Markets
• Templeton's Mobius: 'Attractive Valuations' Still Exist in Emerging Markets