Asia continues to be the structural growth story of the decade, benefiting from a large and young population, burgeoning consumer spending, rising living standards and considerable spending on infrastructure.

This year, gross domestic product (GDP) growth in Asia (excluding Japan) is expected to grow by as much as 7 percent. In the vanguard of the Asian growth race this year are China, India, Indonesia, Malaysia, and Thailand.
The region’s inflation beast is expected to remain in its cage, hovering at around 4 percent. Asian governments enjoy complete flexibility with interest rate policy. As India recently showed, Asian countries are ready and willing to cut rates when growth suffers.

India cut its Repo rate this year for the first time since 2009. What’s more, the Indian central bank was one of the first to raise rates after the financial crisis, to curb speculative excesses. Rate cuts are less likely in the economies of South Korea and Taiwan, which are more closely linked to the US recovery and boast upbeat growth prospects.

Policy makers in Asia, as in most emerging markets, are now in a pro-growth mode rather than an inflation fighting one. Growth is what’s needed and that’s what emerging markets are starting to deliver.
Asia finds itself in a good position, given that its economies are surviving the euro zone shock. As it did during the 2008 global financial crisis, Asia once again is showing that its economies are considerably more resilient than expected.

Just as they avoided deep recession more than three years ago, Asia’s economies continue to grow, even as Europe sinks further into the unknown. The improving US economy has provided a tailwind.

The upshot for the long-term investor is that Asia is now the undisputed growth engine of the world’s economy. Investors should substantially increase their positions in Asia, as this still-robust region continues to prove resistant to the economic woes plaguing the indebted developed world.

Asian markets as a whole trade at reasonable valuations of 1.68 times earnings (MSCI Asia Pacific ex-Japan index), lower than the long-term average of 1.8 times, and at around 12 times earnings compared to the long-term average of 14.

Three of the region’s largest economies—China, India and Indonesia—still enjoy solid economic growth of between 6 percent and 8 percent. This compares favorably to anemic growth in Western developed economies.
Low leverage among governments, corporations and consumers is another long-term advantage for Asia. The total absence of sovereign-debt risk is an even bigger positive for the long-term investor.

Consequently, any pullbacks in Asia stemming from adverse developments in Europe or the US should be viewed as a buying opportunity.
 
Consider in the GIS portfolio the cyclical and growth-oriented recommendations, including financials, auto, energy, and industrials.

These stocks include India’s Tata Motors (NYSE: TTM); China Construction Bank Corp (Hong Kong: 0939, OTC: CICHF); Korea’s KB Financial Group (NYSE: KB); Singapore’s Keppel Corp (OTC: KPELY); Japan’s Fast Retailing (Japan: 9983, OTC: FRCOY); and Taiwan Semiconductor (NYSE: TSM).

Finally, as mentioned here last week, continue to buy the iShares MSCI Indonesia Investable Market Index Fund (NYSE: EIDO), which offers exposure to banks and key industrial, materials and energy companies in Indonesia that otherwise would be almost impossible for individual investors to buy.