Emerging market equities, which have surprisingly underperformed so far this year, will bounce back and the total return from emerging equities will eclipse those from developed market equities in 2011, according to an analyst.

Capital Economics analyst John Higgins said in a note it is unusual for emerging market equities to do badly when developed market equities are strengthening. It is more common for them to underperform when developed market equities are weakening, as in 2008, he said.

Surprisingly, the total return in dollar terms from emerging equities was about minus 4 percent since the start of the year while the developed market equities’ return was about plus 5 percent over the same period, Higgins pointed out.

However, the emerging equities will bounce back this year, owing to certain favorable factors. Higgins says growth in emerging market economies will not slow sharply as fears of further rate hikes have somewhat receded.

Rates are unlikely to need to rise sharply from here. Admittedly, the usual lags mean that the impact on headline inflation of past rises in commodity prices is likely to persist for a while. Nonetheless, it should fade before too long and we expect commodity prices to drop back sharply later this year, he said.