Emerging markets turned positive for the year this week, and Washington Crossing Advisors' Chad Morganlander said their performance could get even better.
"We are overweight this sector for the first time in three years," Morganlander, a portfolio manager at his firm, told CNBC's "Trading Nation" on Monday. "The big picture is that 85% of the global population is domiciled in emerging markets with less than 50% of global GDP. We see the emerging markets as better relative value as well as growth."
While emerging markets could be impacted by the results of the U.S. election, Morganlander said his call is not tied to the outcome. Instead, he sees opportunity in the global economic recovery from the coronavirus crisis.
"As we go into 2021 in the later half, we think that as Covid passes, global growth will reaccelerate, reemerge, social mobility will reemerge and you'll start to see commodity prices go higher. This will all benefit emerging markets," said Morganlander.
The EEM emerging markets ETF, heavily weighted toward China at more than 40%, has underperformed the broader market this year. It is up 1% in 2020 while the S&P 500 has risen 4%.
"The charts are aligned with Chad's call. The reason why is that emerging markets really have become a story on China tech, which has become a much bigger part of that MSCI emerging markets index versus the more commodity exposure in the index 15 years ago," Ari Wald, head of technical analysis at Oppenheimer, said during the same "Trading Nation" segment.
To make a play on Chinese tech stocks, Wald is backing the KWEB China internet ETF, which holds Alibaba and Tencent among its top constituents.
"It's breaking out versus the emerging market index EEM. The chart I'm showing shows the excess returns versus the benchmark. It is leading versus the new relative strength that we're seeing in EM broadly," said Wald.
The KWEB ETF has soared 58% in the past 12 months, far better than the 5% gain for the EEM ETF.
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