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If you wanted to make money in equities in the first quarter of the year, you had to be in emerging markets. While most developed markets showed double-digit losses, the MSCI Emerging Markets index eked out a 0.5 per cent gain.

Those who managed to be selective will have performed even better. The countries to avoid were generally in eastern Europe, where the Czech Republic, Hungary and Poland all suffered heavy losses. The region is heavily exposed to Germany’s faltering economy and suffering its own version of the late 1990s Asian crisis, thanks to depreciating currencies. Many consumers and companies had taken out debt in euros and Swiss francs, and the burden of the debt has increased sharply.

But three of the four Brics – Brazil, China and Russia – all made gains, while India suffered only a small loss. And those investors who joined in the rally towards the end of the quarter did best of all – according to Bank of America Merrill Lynch, the MSCI Emerging Market index’s 14.6 per cent gain in March was the best monthly return since April 1999.

Why the rally in March? In part, it represents a rebound from a very dreadful 2008. Another reason is that many developing markets are commodity dependent and raw materials had a pretty good first quarter; The Economist's industrial commodities index rose by 9 per cent.

A third reason is that emerging markets are most sensitive to global growth. And in the past few weeks, we have seen signs that the data, while not pointing to a rebound, at least suggests the pace of decline may be easing. Analysts have dubbed this trend the second derivative – the rate of change of the rate of change.

If global output is forming a bottom, it makes sense for emerging markets to recover first. Over the past five years, the MSCI emerging markets index has had a beta of 1.58 relative to the index for the G7 countries, according to RBC Capital Markets. So, if you think the world is about to rebound, they are the place to be.

But it is a risky bet. According to James Montier of Société Générale, the cyclically adjusted price/earnings ratio (this averages profits over the past 10 years) of emerging markets is 18. That is, at best, around the historic average. Mr Montier says emerging markets don’t get really cheap until the ratio falls to 10 - as it did five years ago, for example.

Bond investors are also showing caution towards the emerging market class. The spread over Treasury bonds is hovering between 600 and 700 percentage points, down from its highs but well above the 200-300 points seen a couple of years ago. And it is going to be more difficult for emerging markets to get their share of global savings, because developed markets want so much. RBC Capital Markets estimates G10 governments will need to raise more than $4trn (£2.7trn) from the debt markets this year.

Emerging markets did rally on the news the G20 package included more money for the IMF, but that is a double-edged sword: IMF money only tends to get handed out to countries when they are trouble. The scale of the package indicates how much trouble world leaders are expecting.

It just looks a little too early to be piling back into this high-risk sector, especially as we know corporate governance is not what it might be. Developed markets are quick these days at discovering where the bodies are buried. There must be many emerging market companies that expanded too far and too fast in 2006 and 2007 and are only now coming to terms with the collapse of their business model. Satyam Computing Services, the Indian group whose founder confessed to fraud, won’t be the last example.

Philip Coggan is Buttonwood columnist for The Economist