The global financial crisis has seen a virtual meltdown in developed economies around the world. Highly-leveraged companies buckled under the credit crunch as governments came to their rescue with billion-dollar rescue packages.

But for Asian economies the harsh lesson learnt from the 1997 Asian financial crisis has in part helped the region steel itself against the current global market meltdown.

HSBC Halbis chief executive Ayaz Ebrahim began with the firm at the start of the Asian crisis, taking on the job of chief investment officer.

"For me the Asian crisis was really a watershed in Asia," he says.

Ebrahim says his first year in the job was challenging, but since then the significant events of the crisis have reshaped Asian companies.

"From a micro standpoint there is now a much more efficient use of capital by these companies," he says.

According to Ebrahim, return on equity before the crisis was 3 to 4 per cent. Now the region is delivering a return on equity of 15 to 16 per cent.

A key driver behind these improved returns has been a revamp of how companies in the Asian region operate. Corporate debt levels have come down significantly over the past 10 years and there is now a greater focus on creating shareholder value, Ebrahim says.

"Big is no longer beautiful, which was happening pre-Asian crisis. Given the more efficient use of capital, more money is being returned to shareholders and we can see that in the increased corporate dividend," he says.

Such lower debt levels and leaner businesses will help the region withstand the crisis, he says.

"Even at a consumer level, balance sheets are much healthier. The need to access new capital or loans is much less than it was and so both the consumer and corporate sector can withstand the tightness in the credit market," he says.

In assessing the growth of Asia, China is one country that has dominated the agenda. It's a country that remains focused on sustained growth, having looked closely at the hard mistakes made by the US and Japan, according to Pengana portfolio manager Diane Lin.

"The Chinese government has done a lot of homework in understanding the US Great Depression and the deflation period in Japan. They have learnt to not repeat the same mistakes made by those two countries and that is why they were so quick with implementing a fiscal expansion and easing liquidity early," Lin says.

For RCM Asia Pacific chief investment officer Raymond Chan, the ability by the Chinese to turn a crisis into an opportunity is inherent in their language. The Chinese word for crisis is made up of two characters - we and ji. The first character means danger while the second character means "opportunity".

"The Chinese language literally places opportunity within a crisis," Chan says.

Unlike Japan, China also focuses on long-term opportunities that will deliver long-term growth, he says.

"When Japan was going through its boom, the country was investing in golf courses in Australia. China on the other hand has taken a more strategic approach and instead took stakes in Australian resource companies," he says.

Despite China recording the weakest quarter on record, he says the country is still on track to deliver growth.

"Although China's recent growth was the weakest on record, the annualised 6.1 per cent in the first quarter was still positive growth. While there is a high chance that growth may not be in the 8 per cent to 10 per cent range we've seen in recent years, we are quite confident that positive growth of 6 per cent to 8 per cent is quite likely," he says.

Chan says a number of indicators have shown signs of stabilising in China, such as power consumption, purchasing managers' surveys and fixed asset investment.

For Lin, China will remain the growth engine for the region.

"Fundamentally, we like China the most. The government has shown its credibility that it can stabilise the economy when the crisis started," she says.

In particular, Lin says the country is moving towards more value-add industries. "The big focus in China is to increase productivity. The best way to do this is to develop value-add industries. China is now moving from heavy-type industries to producing more high-end products that add value," she says.

Ebrahim says China is also looking at investing heavily in infrastructure.

China's $715 billion stimulus package in November 2008 represented 15 per cent of GDP and about 65 per cent of it will be spent on infrastructure projects including railway networks, roads and power facilities, according to Ebrahim.

While China remains a standout economic power in the region, other countries such as India still offer growth potential.

The recent elections in India saw the country's ruling party remain in power, an outcome welcomed by the market. India's Sensex index soared 14 per cent - the steepest hike since March 1992.

The economy grew more than expected last quarter, expanding 5.8 per cent in the three months to 31 March.

Chan says India is still likely to incrementally face a more difficult fiscal position as the government deficit exceeds 10 per cent of GDP and a funding gap widens due to falling tax receipts.

"Despite these headwinds, it is still likely that India will eke out a positive economic growth rate over this year," he says.

Even though Korea's substantial foreign borrowing last year spurred a severe currency devaluation, Chan says the country is still positioned for growth.

"Korean exporters have managed to gain considerable market share. While the path will be painful this year as the Korean consumer and financial system face extraordinary stress, there is a chance that Korea may be able to grow through the second half of the year if export markets can turn around."

The export industry has been a vulnerable point for the region for some time and could prove a barrier to growth.

"Asia has proven to be very export dependent. It will be a difficult process to diversify economic growth away from this factor, though we feel that Asia is well positioned to work though this," Chan says. Ebrahim says Asian countries are now implementing policies to stimulate the domestic economy in order to offset the weakness of their export industries. This will further assist them in withstanding a global meltdown, he says.

The long and short of it  
While the region is poised for growth, Lin says this will follow a rollercoaster ride. From 1998 to 2008 the MSCI Asia - ex-Japan Index delivered 6 per cent on the back of huge volatility, according to Lin.

She says the ability to short in the Asian market is critical if managers are to ride this volatility and outperform.

It was the chief reason behind Lin leaving Perennial in July 2008 to set up a business with Pengana.

"At Perennial we were unable to take short positions. With Pengana's support we were able to set up a hedge fund that gave us the flexibility to protect the portfolio during a market downside," Lin says.

Lin adds that long managers are forced to pay attention to the index and "the blue-chip stocks of today may not be the blue-chip stocks of tomorrow".

"When investing in Asia, the way to make money is not to lose money because you could be facing losses of up to 30 per cent."

But for Chan the ability to go long in Asia has been available and will continue to be available in the foreseeable future.

While there has been a divergence of valuations he says the appetite for risk has recently returned to the region, with liquidity now flooding into riskier stocks of a lesser quality.

While the market may appear rather overvalued for anyone just looking to Asian markets as a whole, opportunities are best sourced through fundamental analysis.

"While macro factors are largely the catalyst for the market's rebound, in the current environment fundamental stock picking can help to differentiate between many of the investment opportunities that occur."