In a global economy, there are plenty of opportunities to invest outside of North America and Europe. Asia, in particular, offers a host of opportunities. Also, it is home to robust financial markets representing trillions of dollars. Any market that large is bound to offer some interesting investment opportunities. (Emerging markets like India are fast becoming engines for future growth. Find out how to get in on the ground floor. Check out The Indian Stock Market 101.)
TUTORIAL: The Forex Market

The regions of Asia are divided into developed and developing economies. The highly developed countries include Japan and the four countries often referred to as the Asian Tigers - Hong Kong, Singapore, South Korea and Taiwan. Major players among the other powerhouses include Russia, China, India and Malaysia. These other nations are major economic forces, but academics often debate whether or not they can be classified as "developed". Malaysia, for example, is a major source of scientific innovations, yet fails to be fully recognized as a developed nation.

Asia's Development
Historically, while the Asian markets have had stock exchanges for more than 100 years, they did not rise to prominence until after World War II. Japan set the pace with protectionist policies, and a strong central-government-led development effort that turned the country into an exporting powerhouse.

In time, its neighbors soon took notice of the trend. A host of other nations, including Hong Kong, Singapore, South Korea, Taiwan, Vietnam, Thailand, India and China, began a period of rapid industrialization in the early 1960s that continued through the 21st Century. These nations entered the global marketplace by exporting mass-produced products and then, over time, many of them evolved their efforts to enter the high-tech arena. With the injection of large amounts of foreign investment capital, the Asian Tiger economies grew substantially between the late 1980s and early- to mid-1990s.

Cross-industry growth continued until 1997 when Asia was struck with the financial crisis. The main cause of the Asian financial crisis was the collapse of the Thai baht which was ineffectively pegged to the U.S. dollar, as Thailand accumulated an excessive debt burden. Although many other regions such as China were less affected, Asia's economic growth experienced major setbacks. Since the late 1990s, these economies have recovered.

Korea is a prime example of a country that emerged from the turmoil to become a dominant player in international markets, as the country has become a technology powerhouse. With a high emphasis on education, South Korea is one of the world leaders in the robotics, biotechnology and aerospace research fields. China and India are following suite, as they work their way through the same development process. (Brazil is well positioned for future growth, and luckily for investors, it also has a very liberal investing climate. To learn more, see Investing In Brazil 101.)

Opportunity: How Investors Can Get In
The development of Asia and the cross-border flow of capital globally present a host of opportunities for investors. For investors who prefer to delegate research and trading responsibilities to professional money managers, there are numerous mutual funds and Asia-specific exchange-traded funds (ETFs) available. These funds run the gamut from regional to country specific, index trackers to sector-specific stock selectors and offer an inexpensive and easy way to benefit from diversification and professional management.

For those who prefer the do-it-yourself method, American Depository Receipts (ADRs) provided an excellent way to buy shares in a foreign company while realizing any dividends and capital gains in U.S. dollars. ADRs are negotiable certificates issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. For example, foreign firms listed on the New York Stock Exchange as ADRs give investors the opportunity to put their money into such internationally known brands as Honda (NYSE:HMC), Hitachi (NYSE:HIT), Mitsubishi (NYSE:MTU) and Sony (NYSE:SNE).

Different than Western Developed Markets
Asian financial markets, particularly within developing economies, are still generally less mature and less regulated than markets in America or Europe. Bond markets, in particular, are often underdeveloped, as bank financing is much more common than financing via the issuance of corporate debt. On the equity side, Asian markets are less likely to do the same type of capital restructuring that is common in America, with leveraged buyouts and similar maneuvers being exceptions rather than the rule. The wide variety of financial products available through retail banks is also more common in developed countries outside Asia.

Regulatory reforms in Asian financial markets also lag Western markets, and political factors can play a role, particularly in less developed economies where government intervention can be heavy. The operating differences and regulatory differences all serve as reminders of the need for investors to conduct research and give careful consideration to any investment before adding it to their portfolios.

Asian Flavor for Your Portfolio
At the end of 2010, the Asian economies were still booming. China, South Korea, Thailand, Indonesia and Malaysia are exporting powerhouses. Gross domestic product is rising in these nations and so are the investment opportunities. Double-digit stock market returns have left Western markets in the dust over the past decade, and investors are taking notice.

Investing is Asia provide access to a significant portion of the world's stock markets in a fast-growing, exciting region. Putting a portion of your portfolio in Asia can help fill your portfolio's allocation to international investments.

For additional insight into international investing, check out Does International Investing Really Offer Diversification? and Evaluating Country Risk For International Investing.

Related Articles
  1. Sectors

    3 Cyclical Industries To Exploit in 2016

    Learn about the three industries at the down end of their business cycles, and discover how these industries may improve in years to come.
  2. Stock Analysis

    3 Risks Emerging Markets Debt Faces in 2016

    Learn about the major risks for emerging market debt in 2016. Discover how low interest rate policies by central banks fueled the growth of debt globally.
  3. Stock Analysis

    If You Had Invested Right After Berkshire Hathaway's IPO (BRK.A)

    Learn how much you would now have if you had invested right after Berkshire Hathaway's IPO, and find out the classes of shares that you could invest in.
  4. Stock Analysis

    Is Now the Right Time to Buy Coty? (COTY)

    Find out whether fragrance and color cosmetics powerhouse Coty deserves a place in your portfolio. Will recent acquisitions help turn the company around?
  5. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  6. Economics

    The History of Stock Exchanges

    Stock exchanges began with countries who sailed east in the 1600s, braving pirates and bad weather to find goods they could trade back home.
  7. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  8. Investing Basics

    5 Common Mistakes Young Investors Make

    Missteps are common whenever you’re learning something new. But in investing, missteps can have serious financial consequences.
  9. Investing Basics

    5 Questions First Time Investors Should Ask in 2016

    Learn five of the most important questions you need to ask if you are a new investor planning on starting an investment program in 2016.
  10. Fundamental Analysis

    Is Brazil Currently in a Depression?

    Find out if Brazil, the world's seventh-largest economy, may have finally slipped into an economic depression, and learn the reasons why.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. What is the 'Rule of 72'?

    The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of ... Read Full Answer >>
  4. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Full Answer >>
  5. Is Malaysia a developed country?

    Despite undergoing rapid economic development over the past five decades, Malaysia is not considered a developed country, ... Read Full Answer >>
  6. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center