Asia remains an attractive opportunity for investors, with China and India having the greatest potential, according to Frances Dydasco, portfolio manager of the Asia ex-Japan strategy at US investment manager T Rowe Price.

Ms Dydasco sees China and India as brightspots in what is a very challenging global environment and looks to these countries to lead the world economy out of the recession.

She believes that over the longer term, China and India are attractive investment opportunities, contrasting sharply with other large but developed Asian markets, such as Korea and Taiwan, which are more exposed to the slowdown in global trade.

Ms Dydasco asserts that despite a slowdown in growth China is an “attractive top down market” compared to virtually anywhere else globally and should remain robust in a global context.

China does however need to boost consumption to wean itself off a dependence on exports and over-investment in Ms Dydasco’s view, and this will entail long term government spending to improve the social safety of China’s citizens.

Ms Dydasco cautions that the earnings of Chinese companies – especially those that are state owned - might suffer as part of this transition and for this reason T Rowe Price favours private sector companies.

The Indian stockmarket has underperformed relative to other Asian markets, but Ms Dydasco sees this as an opportunity for long term investors to add high quality Indian companies to their portfolios at attractive valuations.

“Many Indian companies now trade at valuations that assume they will either go bust or that the current crisis continues forever. This is unrealistic. The leading companies in India have access to capital and many will be able to consolidate their industries. Many will emerge from the downturn significantly stronger,” said Ms Dydasco.

In India, T Rowe Price will focus not only on consumption but also on the lower interest rate beneficiaries in the industrials, infrastructure and real estate sectors which have been out of favour recently.