Going into 2015, investors will be closely monitoring a number of ongoing dynamics, not least the direction of oil prices and global geopolitics.

There was a time not too long ago when such news as South Africa’s narrow escape from a credit downgrade that would have pushed its rating to below investment grade would have resulted in a marked retrenchment from that market. Today, though, these sorts of headlines no longer have the sort of impact they used to have.

South Africa, said Ben Rozin, senior analyst and portfolio manager at Manning & Napier, has a number of well-managed and highly profitable companies despite its macroeconomic woes. Enterprises like South Africa Breweries (SAB) and others in the Internet space have been key holdings in his portfolio and will continue to be.

“Today, the emerging markets are a very mixed bag so you can’t treat the space as a single asset class,” Rozin said. “Some countries do face negative headwinds, and South Africa has many troubles, but that doesn’t mean that there aren’t investment possibilities there and companies that are global in nature and attached to secular growth drivers.”

Searching for these kinds of opportunities in an attractive universe where valuations are down (emerging markets are trading at a 31% discount to the 12-month forward price-to-earnings ratio of the MSCI World Index) requires active management and good stock picking skills. It also requires paying attention to macroeconomics and global dynamics, both of which exert a great influence on developing economies. Going into 2015, investors will be closely monitoring a number of ongoing dynamics, not least the direction of oil prices and global geopolitics.

The sudden and unexpected drop in oil prices has proven as detrimental to countries that export oil, such as Brazil and Russia, as it has been a boon to those that import oil, such as India and China. The latter have also made optimal use of the oil price decline by wisely stocking up on their reserves, Rozin said, and this will help them out a good deal in the long run.

More importantly, though, the oil price boon adds fuel to the reform process that’s underway in both India and China. In 2015, those countries that step up on structural reforms are those that will prove to be the best investment destinations, said Anthony Cragg, portfolio manager of the Wells Fargo Advantage Asia Pacific and the Wells Fargo Advantage Emerging Markets Equity Income funds. In his view, the strongest reform momentum is taking place in Asia.

In India, for instance, the government of Prime Minister Narendra Modi has undertaken a series of reforms to tackle inflation and spur infrastructure, an area that India has sorely lagged behind in and that has constrained economic growth. In China, a whole range of fiscal reforms, as well as a major anti-corruption drive, are helping to make investing there more attractive. Cragg is positive, too, about the reform momentum in Indonesia and The Philippines.

This contrasts sharply with a country like Brazil, which not only is suffering from the fall in commodity prices but has also fallen off the track with respect to much-needed reforms for longer-term growth and stability, Cragg said.

“On the whole, the fiscal position of governments across Asia is much stronger than elsewhere in the emerging markets world and this ensures a far more stable environment politically as well,” he said. “I would also mention the length and breadth of the stock markets in Asia as an important plus point: Unlike other countries, Asian markets offer everything from technology stocks to consumer, IT and auto stocks. There’s plenty to choose from.”

In 2015, Cragg has his bets placed on China’s A-shares market, which, he said, “is by far the best performing market in the world.”

Prior to October 2014, these relatively large and liquid names listed on the Shanghai exchange were only available to domestic investors, but they offer a huge investment opportunity to foreign investors, Cragg said, and “even after the massive run in China A-shares, we are nowhere near them being expensive, so there’s a lot of catch-up to be done there. This is a market that will be outstanding in 2015.”

On a more macro level, China’s leaders have been systematically centralizing power in order to steer the economy in a direction that will result in more sustainable and longer-term growth, Rozin said. Although as an investor he is still leery about owning Chinese state-owned companies because of the high level of government intervention they are subject to, “the reform process and the centralization of power will likely benefit a number of private companies in China, and we don’t mind owning those,” he said.

While China and other Asian countries may be more insulated from major sources of geopolitical tension, it is still a risk for them. In fact, the deteriorating situation in Russia – a key uncertainty for financial markets — is a huge risk for developed markets as well, Cragg said, (“We basically have a zero weighting in Russia. We continue to be dismayed by developments there.”), as is the continued threat of ISIS, which has repercussions just about everywhere across the globe.

Emerging markets – particularly those with large amounts of foreign currency denominated debt – are also susceptible to the interest rate hike that many are anticipating for the early part of 2015.

Nevertheless, given that emerging markets as an asset class was out of favor over the past couple of years, the supply and demand dynamics are extremely favorable, Cragg said, “at these attractive valuations or otherwise.”

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