Viewing emerging Asia from close-up can make one de-pressed at first sight. The regional economic giant, Japan, remains moribund and every economic data release has a minus sign in front of it apart from unemployment. Fears of a slowdown in the Western Economics threaten to strangle the last remaining lifeline - a reasonably buoyant export sector. Yet in the last month or so Asian markets have emerged from the slumber. The Hong Kong Monetary Authority has made a killing in the Hong Kong market, the Thai baht and Indonesian rupiah have rallied strongly against the dollar and the Chinese are stimulating their domestic economy rather than complain from the rooftops that the yen is too strong. And after 12 months of not so careful deliberation the Koreans have finally sold Kia Motors!

Why? Primarily because life is all about cycles and Asia has been through the cycle of a lifetime which, hopefully, has now turned forthe better. That's not to say Asian economies do not have structural deficiencies, they do and they need to be fixed, but clear signs of 'bottoming' are clear to see.

Second, and almost perversely so, Asia is a beneficiary of the recent rise in risk aversion. In times of global panic you want to invest in countries which are (1) attracting long term capital inflows - Asia is awash with MNCs buying up assets, (2) cashflow positive - Asia excluding Japan will have a $100bn current account surplus this year and

(3) countries where liquidity conditions are fast easing - Asian domestic interest rates are collapsing.

Third, it is fairly obvious to those who look that Asia is better positioned to benefit from any upturn in the global economy. First consider the proximity and trade links with Japan, Asia will spin if Japan puts it's house in order. Second, it is more geared to international trade and more industrialised than the majority of commodity-based emerging markets. While it is clearly premature to talk of an OECD upturn - we've only just started the downturn - remember that Asian markets are early cycle performers unlike commodity markets which tend to be late cycle performers.

Finally, the fact that these markets can be bought for a fifth or less of their value two years ago, coupled with the fact that no self respecting emerging market manager would admit to owning anything Asian a month ago makes Asia ex Japan look the relative emerging markets no brainer" for the next 12 months.

Henry Thornton is investment director, international group, Nicholas Applegate Capital Management UK in London"

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