In July 1964, the Hang Seng newspaper company in Hong Kong launched its famous stock market index. If you had invested $100 in the member companies expecting them to surge in value short term, you would have been disappointed: in the subsequent four years, the market sank by a third.

But if you had taken a long-term view and held on to your investment through the Asian financial crisis of 1997 until early this month, you would have been much happier: that $100 would have been worth more than $30,000. By comparison, in the same period, $100 invested in the Dow Jones industrial average would have only risen to $1,500.

This is a simplified example but it does show the past value of long-term Asian investment. Long-term investors should take Asia seriously for two reasons: the potential for strong – though sometimes erratic – growth, and the diversification benefits of investing in markets that are not so synchronised with developed countries.

During the economic miracle, “Asian tigers” such as Singapore, Taiwan, South Korea and Hong Kong crammed a century’s worth of economic development into a few decades. That seemed to end in the 1997 financial crisis. But in retrospect it was only a pause for many countries. The reforms were painful but companies learned to concentrate on core businesses and create shareholder value; they cut their borrowings and learned to finance growth internally.

Now China is following a similar path to that pioneered by the tigers. India, too, is growing rapidly, and smaller “frontier” economies like Vietnam show enormous promise.

Wise investors know that past performance is no guarantee of future growth. There is the grim example of Japan, where the economy has been firmly stuck in a rut for nearly two decades. The Tokyo stock market peaked in December 1989 at the height of what the Japanese call the “bubble economy”. The Nikkei 225 average hit 38,915 years later, but now is worth less than half that.

But the signs are encouraging elsewhere in Asia. China, for example, is already home to some of the world’s largest companies by stock market value. Many of them are big because China is a big country. With a market of 1.3bn people, it is not so surprising that China Mobile, for example, is the world’s most valuable telecoms company. China Mobile customers send 2bn text messages saying “Happy New Year”, says Dong Tao, Credit Suisse’s chief regional economist in Hong Kong. “That’s where I see value.”

But there is also room for smaller companies with great ideas and brands to grow rapidly, he adds. “When Coca-Cola and General Electric had their growth days, I wasn’t born,” Mr Dong says. Now he believes it is his generation’s turn to find a Chinese equivalent of such legendary growth companies while they are relatively small.

“I don’t want to miss that,” he explains. “I plan to hold these stocks, and put them in a drawer and throw away the key, and see what my grandchildren will have.”

Several other trends are likely to benefit Asian markets more broadly. Retail investors are slowly becoming used to the idea of making regular payments into mutual funds instead of taking speculative bets on the latest hot tip.

Pension funds in the region have traditionally been very conservative and only invested in bonds. But populations are greying rapidly, and providers now realise they must invest in equities to generate big enough returns to meet their obligations.

An estimated net $30bn will flow into South Korea’s National Pension Fund (NPF) every year until 2040, says Park Chan-ik, executive director of Morgan Stanley in Seoul. The bank’s asset management arm advises the NPF. About 13 per cent of that will go into equities, which is likely to support the market for a long time yet.

“Whenever the market drops, then they [the NPF] will have to allocate more money into equities,” Mr Park explains. “They’re not leading the market but they protect it from downside risk.”

Asian markets have been more volatile than their European and North American counterparts.

“In my 25 years, foreigners are either dazzled or despairing,” says Chris Ruffle, co-chairman of MC China, a subsidiary of Martin Currie Investment Management, who has spent most of his career in Japan and China. “So my whole career has been either trying to gee the foreigners up, telling them, ‘You know, China’s a big place,’ and they should think about investing there. Or trying to calm them down, and explaining the risks involved.”

But that volatility should not worry a diversified investor with a long-term view who sees Asian stocks as part of a wider portfolio.

There is a growing argument that Asian economies may be “decoupling” from the US and other developed countries as they mature and rely less on exports to the west. Japan’s record trade surplus in September, for example, was due in part to the country selling more goods to its Asian neighbours.

“The strongest growth in Chinese exports actually has been going to Latin America, Africa and to the Middle East, rather than

to the US itself,” says Khiem Do, head of multi-asset at Baring Asset Management in Hong Kong.

Any market downturns in the US should have less of an effect on Asia than in the past. “It is not going to derail Asian growth,” he adds, “because domestic demand in Asia is very strong.”