A new era of opportunity for Asian equity investors

THE pace of economic growth in Asia will inevitably slow as the region's economies mature, but I believe that investors in Asian equities can still reap healthy returns if the lessons of history are any guide.

The "Great Moderation" - a sustained period of macroeconomic growth and reduced volatility that began in the 1980s in the United States - has provided an important backdrop to the strong performance of US equities over the past three decades. Although temporarily disrupted by the global financial crisis (GFC) in 2008, the resurgence of "great moderation" dynamics post-crisis seemed to have once again helped to support the sustained performance of US equities over the last five years. I believe that the experience of the "Great Moderation" holds considerable relevance for equity investors in Asia as it shifts to a slower pace of growth.

Are the conditions for a "Great Moderation" starting to fall into place in Asia? The answer to this appears to be positive as the policy emphasis in Asia has already shifted towards the sustainability of growth rather than just the quantum of it. Under the leadership of President Xi Jinping and Premier Li Keqiang, for example, China's growth target has been guided down to the 7-7.5 per cent level as they push ahead with multi-faceted fiscal and monetary reforms. In India, the Bharatiya Janata Party's recent landslide victory has provided the new government with a strong mandate to realise the country's full economic potential.