Emerging markets took a hammering in the first quarter following last December's devaluation of the peso.

The flight of foreign investment out of Mexico lead to the stock market falling 43 per cent. This affected other emerging markets.

Ms Cornell said positive signs were now appearing.

'People were on a witch hunt after the Mexico debacle. They inspected all the Asian countries, all the Latin American nations and several Eastern European economies.

'After a while they realised there is only one Mexico and a number of these nations are beginning to rebound strongly.' She said the emerging markets showing the strongest rebounds were Poland, Peru and Indonesia.

'Where is the most excitement now? Poland,' It's the cheapest for what you're buying in terms of quality and growth rates.

She said Poland had a skilled labour force and was beginning to benefit from its proximity to Germany.

'I think people have underestimated how well many Latin American countries are getting it right,' she said.

'Our favourite country is Peru. Mr Fujimori [Peru's president] has just won re-election for another five-year term. This time his party swept the congress.

This means market liberalisation would progress faster, she said.

Ms Cornell said Indonesia was promising because of its investment liberalisation and major tax cuts.

'The other thing is oil. Oil prices will continue to strengthen,' she said.

While Scudder is bullish, the performance of its emerging markets fund for the year to May was down.

Ms Cornell said the returns would improve during the year.

Scudder has about $100 billion of funds under management, about $5 billion of which is invested in emerging markets.