Emerging equities have returned almost 25 percent year-to-date to be this year's top-performing asset class. They are up almost 7 percent this quarter, despite a slight reversal in the last week caused by an upswing in the dollar and U.S. yields.
Within that, stocks in Brazil <.BVSP> and Russia <.MCX> were among the best-performing emerging markets in the past three months, with gains of 21 percent and 14 percent respectively.
For the first nine months of 2017, Polish <.WIG20> and Chinese equities were leading the pack.
Maarten-Jan Bakkum, emerging markets strategist at NN Investment Partners, noted that emerging markets had in recent months easily digested tensions between the United States and North Korea, signs of a Chinese slowdown and the Fed's hawkish signals.
"The capital flows to emerging markets have not been reversed by these three developments. Indeed, interest rates in the emerging world have continued to fall and emerging equity markets continue to perform well," Bakkum said.
"The main explanation for this is the improving outlook for economic growth in most emerging countries."
Emerging currencies have also rallied strongly in 2017 - JPMorgan's ELMI Plus currency index is up 9 percent this year and 1.6 percent in the July-September quarter <.JPMELMIPUSD>.
The Chilean peso <CLP=> and Brazilian real <BRL=> rose the most, strengthening around 4 percent in the third quarter against the greenback: http://reut.rs/2yIUZTf.
Bonds denominated in emerging currencies are also among the winners of 2017, gaining 13.7 percent year to date, while hard-currency sovereign debt is up 8.4 percent: http://reut.rs/2yIEztQ.
Average local-currency bond yields measured by JP Morgan's index <.JGEGDCM> are now less than a percentage point away from record lows hit in 2012.
But the rally has further to go, many reckon, despite a looming U.S. interest rate rise, because inflation-adjusted yields in the sector are high enough to compensate for risks.
"Emerging market (local-currency) yields have dropped below 6 percent, but even if the nominal yield has dropped, real yields are still attractive versus the real yield in developed markets," said Paul Greer, senior emerging debt trader at Fidelity International in London.
But there have also been stragglers in the third quarter.
Greek stocks <.ATF> fell around 16 percent on concerns over the health of the banking sector, while Qatar's index <.QSI> suffered further losses against a backdrop of tensions between Doha and other Gulf Arab states.
The Argentine peso <ARS=> and South African rand <ZAR=> slipped by over 5 percent and 3 percent against the dollar during the third quarter.
The rand has had a choppy year because of political uncertainty and mixed signals on the economy ahead of the ruling ANC party's December leadership contest.
(Reporting by Alexander Winning, Marc Jones and Sujata Rao; Editing by Keith Weir)
By Alexander Winning and Marc Jones