Emerging markets delivered strong performance in the second quarter, driven by improved economic conditions and stabilized corporate earnings. The macro-level strengthening included lower inflation, stable commodity prices, improved current account balances and a reversal in currency depreciation.

Economic conditions have continued to deteriorate in emerging markets, and corporate earnings forecasts have fallen. Overall, emerging markets were down 4.3% in the third quarter, underperforming the developed world. In the midst of this negative news, however, were seeing a few bright spots start to emerge, and weve been able to add holdings that, in our view, became mispriced during market volatility.

While China is without question the growth driver and the outperformer among Asian emerging markets, its clear the country is transitioning toward slower growth because of demographic factors and domestic rebalancing. In our view, China is entering a multiyear period of slower growth, but we consider its future growth robust and sustainable when compared with overall global gross domestic product (GDP) growth -- albeit below the annualized pace of more than 10% China experienced from 2001 to 2010.