A teller at a money changer handles Indonesia rupiah bank notes in Jakarta, Indonesia November 11, 2016. Darren Whiteside | Reuters

Emerging markets still offer opportunity for investors, several strategists say, as President-elect Donald Trump's election upset will only pause —but not end—the asset class's recovery this year. "Our view is the market is overreacting and that the truth and reality is somewhere in between (where) you may continue to get a strong dollar with economic growth," said USAA Investments Head of Global Multi-Assets Wasif Latif, who has $9.35 billion in assets under management. He turned slightly overweight on emerging markets from neutral early this summer. "If anything, our next move will be to full overweight, but it could be many years down the road," he said. "We're not reacting to our positions the way the market is."



Concerns of a trade war, near 14-year highs in the Dollar Index, and multi-month highs in Treasury yields have prompted an immediate sell signal for many investors in emerging markets. The iShares MSCI Emerging Markets ETF (EEM) has fallen more than 7.5 percent since the election, while the S&P 500 is nearly 2 percent higher. The Dow Jones industrial average and Nasdaq composite have climbed more than 2 percent, touch record highs just a few days ago.

However, the greenback's strength is particularly negative for emerging markets, whose holdings of dollar-denominated debt become more expensive to pay off when their currencies weaken. This week, authorities in Indonesia, Malaysia, India and South Korea intervened directly or indirectly to stem sharp slides in their currencies, according to published reports by The Wall Street Journal, Bloomberg and Reuters.

"If the dollar goes up this tends to hurt emerging markets," Isabelle Mateos y Lago, a global macro investment strategist at BlackRock Investment Institute, said on CNBC's "Squawk Box" Friday. She is overweight emerging markets. "But emerging markets are much less vulnerable to these developments than they were in the past," she said. "They have lower dollar-denominated debt, they have very strong fundamentals of their own, [and] they have scope to ease monetary policy if need be. And they've been powered by very strong inflows." Emerging market equity funds have seen inflows of several billion a month since July, but those trends reversed in the last three weeks and accelerated after the election. Those funds saw $5.4 billion in outflows last week, the largest such decline since August 2015, according to EPFR Global. The firm also said emerging market debt funds saw a record outflow of $6.6 billion last week.

Source: EPFR Global.

'Digesting the change'