It's not surprising that, in a few short decades, the economies of these emerging superpowers are likely to grow to dwarf all others, bar America.
From an investment point of view, the logic is that money invested in the sharemarkets of these fast-growing economies is likely to multiply far more quickly than in western economies where growth is much slower.
A successful economy doesn't necessarily mean a healthy stock market. The Bombay Stock Exchange Sensitive Index (Sensex) and the Shanghai Stock Exchange Composite Index have both been highly volatile this year. The Sensex, for example, was 542 points down on July 27, July 30/31: 316 points up. August 1: 615 points down. Likewise, the benchmark Shanghai Composite Index fell 5.25 per cent on one day in July. Having said that, the phenomenal growth of the past five years has eclipsed these abrupt falls.
Helen Mac, institutional marketing manager for Tyndall Investment Management New Zealand points out that in the year to July 31, 2007, the Sensex rose by 44%, the Shanghai by 24.2%, and the NZX by 21.6%.
Meanwhile, the economies of the world's two most populous countries India and China are growing at a rate that some economists liken to the industrial revolution in the west. In the words of International Monetary Fund managing director Rodrigo Rato, India and China are the "new engines of world economic growth".
We've heard the Asian miracle story before - in the late 1990s when investing in Asia was nearly as popular as pumping money into vacuous technology stocks. The Asian crisis of the early 1990s saw a lot of investors with burned fingers.
All of this said, how do Kiwis get a share of the action? It is of course possible to buy Asian stocks direct in some cases, but it's not always easy. In some countries there are restrictions on foreign investors. Unless you're planning on being a very active investor, the easiest way to get a slice of the action is to buy into a managed fund that invests in the region such as the Asteron Asian Sharemarket Growth Trust. There are also many overseas-based funds such as Merrill Lynch's India Fund. It's important to note that investing in a single-country fund can be more risky than investing in one that has holdings in a number of countries within the same region.
On the downside, the government's so-called Fair Dividend Rate tax, which came into effect in April of this year, sees international share investments are now taxed only on up to 5 percent of their market value, regardless of the actual income or gains earned. If you invest through a managed fund, the calculations will be done for you.
Diana Clement
Independent Financial Commentator