With the intensifying problems in the US and European credit markets, and increasing concerns over the global economic growth, Asia may not be the center of the financial storm, but it certainly isn't immune to the crisis effects.

Confirmation begins to take shape that Asian economies will slow materially, confounding the earlier "decoupling" hypothesis. And as a result of slowing economic growth, we will continue to see earnings downgrades for Corporate Asia in the next 12 months, as earnings estimates for 2009 are still too optimistic at a time when global liquidity is drying up.

Fear will continue to dominate global markets well into 2009, and that fear will emanate from the US and Europe.

Concerted global action in financial systems will take months to take effect and have an impact. Some form of financial stability will need to be established in the coming months - that is now a priority.

Despite the all-out efforts of the IMF and G7 governments, further bankruptcies in the Western banking and property sectors, in particular, are inevitable.

Job losses, consumer debt write-offs and falling equity and property prices will all take a long time to work their way through the system and will result in a long bottoming-out process.

We may therefore not see "normalization" in the world economy and financial systems for several years.

That said, it is important for investors to look beyond the bleak short-term outlook and keep their eyes on the medium- to long-term growth opportunities in Asia.

This is not to downplay the seriousness of the current turmoil, but we should not forget the long-term favorable economic fundamentals set to play out in Asia, regardless of any cyclical setback.

There is little doubt that the slowing demand from high-leveraged and low-saving OECD countries will hurt regional exports as Western consumers are forced to return to thrift. In place of exports, continued urbanization accompanied by higher incomes and rising domestic demand will gradually become the main economic driver for their lowly leveraged and massively saving Asian peers.

Savings as a percentage of GDP in the region exceeds 30 percent comfortably, with China at 48 percent. Levels of corporate gearing are low, thanks to lessons learned during the Asian financial crisis. The region's billion consumers could turn out to be boosters for the years to come, and the start of the "Asian century" may be just around the corner.

The author is head of investor communications at JF Asset Management.

(HK Edition 10/17/2008 page3)