Reasons to invest in Asia

We hear so much about China nowadays, but however much we learn, the numbers produced by economists and market pundits are still mind-boggling.

Monday, May 16th 2005, 10:42AM

by Richard Newell

The Asian growth story is one that investors have been sold many times in recent years, and not always with glorious results.

Anyone who bought into the great China boom story in the early-1990s will probably have been taught a hard lesson in market hype.

It is one of the frustrating aspects of investing in this region. The growth is there but it is often difficult to make money consistently. Unless one can take a long-term view, Asian markets do not, on the whole, lend themselves to a buy and hold strategy.

They are either cyclical, tied to the fortunes of global demand, or they are, like Japan, in a sort of stuttering recovery phase.

The exceptions are China and India, countries destined to play a more dominant role in the global economy of the 21st century. Both countries are growing from a low base and, while they are bound to experience periods of overheating and faltering sharemarkets, their course is unquestionably upward.

China is not just building infrastructure and manufacturing for its own market. China’s companies will mature rapidly along with the Chinese economy and will ultimately venture beyond their own borders.

A recent report on China by US fund manager Bernstein commented on the fixation that most people have with the billion-strong Chinese market: “Few investors have considered the corollary of Chinese growth: China will produce world-class companies, these firms will build their own brands and they will challenge incumbents in China and around the world.”

India has the same challenges as China, though with the benefit of a democratic political system and the English language, a major factor in India’s information technology boom.

Both countries have huge problems to overcome in balancing economic development with the needs of the broad populace. But from an investor’s point of view, the influence of China and India is being felt not just around the Asian region but globally.

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