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The four parties interested in the success of the Asia Pacific region – governments, consumers, corporates and investors – have enjoyed a decade of growth since the days of the Asian credit crisis in 1997. Indeed the situation then – high, often unsustainable rates of GDP growth achieved at a cost of short-term foreign fund inflows, current account deficits, rising inflation, depreciating exchange rates and slumping stock markets – could not be more different a decade later.

Economic policy management has improved markedly from the 1990s with regional governments less interested in policies which are inconsistent with long-term economic stability and development, partly due to the development of capital markets in the region and partly to greater commitment to seeing through economic policy decisions. GDP rates of growth for most countries in the region are high yet sustainable, and even for China and India - where GDP growth is just above and just below 10 per cent a year - most commentators agree that growth is under control. Inflation is also restrained, albeit with considerable regional variations. The Asia Pacific economies in general enjoy capital and current account balances as well as large fiscal surpluses.

Against this beneficial economic background the consumer in Asia Pacific economies has enjoyed unprecedented growth in standards of living. Numerically it is India and China that have tended to grab the headlines on this score, but one should not ignore how rising prosperity has affected a previously impoverished country such as Vietnam or driven previously affluent societies such as Singapore to new levels. These countries are now enjoying both high savings rates and high levels of domestic consumption.

Such growth has impacted positively on the corporate sector. In general, Asia Pacific companies have never been stronger. Their profitability, as measured in terms of return on equity, is now similar to that of the US and better than Europe. Dividend pay out ratios have been rising rapidly. Debt/equity levels are falling (having fallen from a peak of over 80 per cent in the late 1990s to around 25 per cent now), profits are rising, free cash flow is improving and is as positive now as it was negative a decade ago. Corporate governance, previously a contentious issue with many companies in the region, is also improving.

Against the background of such a dynamic region, investors are spoilt for choice. Do they chase returns in the fast-growing, perhaps overheated, markets of China or India, or look to invest in the less dynamic, cyclical economies of Korea or Taiwan with their heavy and technology industries, including steel, chemicals, transportation, shipbuilders, construction and electronics?

Do they invest in the restructuring of government-controlled listed companies in Malaysia or publicly-listed corporates in Singapore or follow the strength of foreign inflows into India? Does the investor buy into plantation companies of Malaysia and Indonesia (helped by rising agricultural commodity prices on the pickup of Chinese demand) or the “new” markets of Vietnam or Cambodia? To what extent do they follow the trend away from established “old Asia” companies such as HSBC in Hong Kong to “new Asia” concerns and does the investor in the region remain committed to the dominant but separate Japanese market, which has historically been treated by investors as detached from broader regional growth patterns?

The rationale behind treating Japan as a distinct entity has over the years been justified by the historic performance, quality and size of its stock market relative to other Asian counterparts as well as its different broking community and distinct language. This argument has less currency in today’s environment where inter-regional trade continues to grow rapidly and there is a greater co-dependence between Japan and its neighbours, the economies of which are steadily strengthening. In this light, it can now be argued that a pan-Asia including Japan standpoint is the best way to approach investment in Asia Pacific markets.

Looking at the Asia Pacific region in a global context, with a deteriorating US economy, the credit crunch contagion permeating other markets and a weakening US dollar, the burning question is the extent to which Asian markets will be affected. So far, the Asia-Pacific financial system seems relatively insulated from the situation in US and the regional economies are much less dependent on the US as a destination for manufactured export goods than in the past. The proportion of total exports accounted for by the US has fallen by 30 per cent for both groups since 2001 with trade with the rest of Asia, Japan and Europe acting as a counterweight to declining China-USA trade. In particular, the way China adapts to the possibility of a sharply lower growth rate, with the additional possibility of the renminbi floating free of the dollar, may be the overriding story for the next two years.

The region trades on around 13 times prospective 2008 earnings, with a prospective yield of around 2 per cent. This is not dissimilar from the ratings on the FTSE All-Share index where the prospective p/e is 12 times and yield is 3.5 per cent.

The total universe of listings on Asia Pacific stock markets - including China, Japan and Australia and a small number of foreign companies - is estimated to be some 14,000 companies, according to the World Federation of Exchanges. The vast majority of these are not available to investors due to low market cap, liquidity, family control or corporate governance issues. However, even after eliminating these groups, the aggregate number of Asia Pacific companies is several times that available to the domestic UK or US investor.

Given this broad investment universe, there remains the question of how investors can best profit from exposure to these frequently closed markets. A collective investment vehicle, managed by professionals on the ground in the region is perhaps the most straightforward means of accessing these themes and there are currently four UK investment trusts investing on a pan-Asian including Japan basis.

Undoubtedly there will be volatility along the way as the Asia Pacific region as a whole reaches a greater level of maturity, but the prospects for strong and sustainable growth, to a large part immune from wider global economic crises, make a compelling argument for the inclusion of a pan-Asian holding within a broader investment portfolio.

James Budden is managing director of Witan Investment Services