(FORTUNE Magazine) – Born in the Philippines and living the itinerant childhood of a diplomat's daughter, Grace Pineda became proficient not only in her native Tagalog but also in English, French, Russian, and Spanish. Today she applies that fluency to scouting investment opportunities around the world. At 38, she manages some $2.3 billion in total assets for Merrill Lynch, including five emerging-market funds. The oldest, the $571 million Developing Capital Markets Fund, has returned 21.9% annually over the past three years, making it one of the elite performers of its class. Recently she shared some of her investing insights with FORTUNE's John Wyatt.

Less than 30% of your assets are in the Far East now. Isn't that unusually low? Many markets in the world, particularly in Asia, are expensive. Remember, so much mutual fund money poured into Asia last year on the China card. It's such an easy sales pitch when you conjure up images of billions of Chinese ready to consume all kinds of products. But the strong growth expectations have already been factored into the market, while the negatives, like inflation, have yet to be fully recognized.

What about Latin American markets? Good values can still be found in Latin America -- we have been holding our position steady, with 30% of assets invested there. The Brazilian market, of course, has been one of the stellar performers this year, up 80% so far. One stock I like, Melpaper, just went public this month and is not yet well known to investors. The company produces pulp and paper products. It is Brazil's third-largest paper towel company. Another is Capco, which in June was spun off from Clark Equipment, the U.S. auto parts manufacturer. Even though Capco's manufacturing facilities are in Brazil and 75% of its sales come from there, the stock trades only on the New York Stock Exchange. It is not yet well known by Brazilian brokers and its valuation is just half that of its Brazilian competitors.

Banks often make good emerging market plays. Any favorites? We like a Chilean bank with an Irish name, Banco O'Higgins. It too is available on the New York Stock Exchange, as an ADR. Banking in Chile, as elsewhere in Latin America, is increasingly competitive. But management at O'Higgins is strong, and the bank is expanding into countries like Argentina and Peru. Another bank we like, back over the Atlantic, is Banque Marocaine du Commerce Exterieur in Morocco, a premier bank that is being privatized. The quality of its assets is high, and loan demand is strong.

What other lesser-known global markets are you looking at? We have been putting more into the emerging economies of Europe, like Turkey. Turkey was one of the best-performing markets last year and this year one of the worst, down over 50%. With markets expensive worldwide, that low valuation is appealing.

What stocks are you buying? Over the past several weeks we have been buying Kerevitas Gida Sanayii Ve Ticaret, a major distributor of frozen foods. We expect sales to triple next year, largely because of the jump in exports to Europe, Asia, and Latin America. Turkish exporters like Kerevitas can sell products more cheaply abroad -- squid to Japan, for instance -- since the currency devaluation that pulled down the lira by nearly 60%. The company is going at full capacity, running three shifts a day. We also like a brewer, Erciyas Biracilik Ve Malt Sanayii. Beer consumption is quite low in Turkey, just nine liters per person a year. But we think an average of 40 liters a year per person is achievable. ((Americans average 100 liters a year, or 220 pints.))

What else are you finding in Europe? We like Matav in Hungary, the sole provider of telecom services in that country. Line penetration in Hungary is just 16 per 100 inhabitants, well below the ratio here in the U.S., where 54 lines per 100 people is the average. Ameritech and Deutsche Telekom together own 28% of Matav, an influence we like, since Ameritech really added value to New Zealand Telecom a few years back. Another favorite in Europe is Sonae Investimentos, a Portuguese holding company that operates "hypermarkets" -- the big European retail stores that are like supermarkets crossed with Wal-Marts. Portugal was one of the last European economies to go into recession, and we expect it to be one of the last out. That means while interest rates are rising elsewhere, they continue to decline in Portugal, making investment attractive.

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CHART: NOT AVAILABLE CREDIT: FORTUNE CHART/SOURCE: MORGAN STANLEY CAPTION: ONE OF HER COUNTRIES: TURKEY