The talk of the world’s economy for the past year has been focused in one area, Asia. Both US investors and European investors have been investing heavily in the Asian markets for the past year, but is this trend going to hold strong? I don’t believe so. With rising energy prices worldwide and rates on the increase many small time investors are beginning to back out of the Asian market.

Comparing the Asian markets to the Dow Jones is embarrassing. In the past year the Dow Jones has dropped nearly 3%. When looking at major Asian markets we see trends of 14-39% increases for the year, being commanded by the Korea Stock Exchange with a 38.7% increase. To further the recent success of Asian markets, the Japanese Nikkei Stock Average reached a 4 year high and has risen nearly 20% this year.

All of this sounds very good, until we look at why these jumps have been occurring. All the gains in the market have come as energy prices have jumped which can lead to inflation and cause many investors to speculate as to whether or not these markets are accurately reflecting the strength of Asia’s economies (think .com boom in ’99).

The chief economist of The Asian Development Bank was quoted saying “…economic growth could slow further than previously expected.” In addition, The International Monetary Fund cautioned that the risks ahead are “increasingly slanted to the downside.”

Although the downfall of the Asian markets has been a hot topic recently, and many analysts are predicting a downfall in the near future, many foreign investors are not flinching. US investors are still leading the way, pouring billions of dollars into the foreign Asian markets, for two consecutive months now US investors have raised their net investments in these economies. European investors on the other hand have scaled back, but only slightly.

No one can tell for sure what is to come of the booming Asian markets, but many can be skeptical of it. As hundreds of thousands of investors pour billions of more dollars into those Asian economies I see more and more of a resemblance to the overvalued, over saturated and over rated stocks of the .com boom in the late 90’s.