G. Paul Matthews Sees Riches in Asia

We are also encouraged by some of the recent consolidation. The announcement between Konica and Minolta(MNOLF Quote) is a good step forward. But we have yet to see Japan take as radical an approach to financial restructuring as we saw, for example, in Korea three or four years ago. Without that, it would be unrealistic to expect as dramatic a recovery there.

8. Your firm has been quite bullish on China. Do you continue to be so? How do investors separate the wheat from the chaff in China?

We are very optimistic about the long-term picture for China. But China faces enormous obstacles. They have been far more successful getting to where they are today than anyone gave them credit for 10 or 20 years ago. I tend to give them the benefit of the doubt going forward on the big issues they face -- bank restructurings, solving the bad debt problems in the banking system and continuing to restructure the state-owned enterprises.

They are as likely as anybody to succeed. There's no doubting their achievements to date, even if statistics are unreliable as some suggest. Anecdotally, having been to China virtually every year for the past 15 years, I can tell you they have certainly achieved growth on the magnitude that's been reported, even if it hasn't been as consistent as the numbers suggest.

9. What's the outlook for Asian technology companies? U.S. investors aren't high on technology as a sector. How does the outlook differ?

I think there's still very strong underlying demand for some basic technology products, particularly in mainland China. The obvious areas go without saying.

But there is also increasingly a shift in manufacturing to mainland China, primarily in the outsourcing business. As we get into the next few years, we'll see more and more capital intensive technology industries relocate to China, including semiconductors.

I think technology investing remains an integral part of the emergence of non-Japan Asia.

10. Your funds, by nature of the region in which they invest, have been extremely volatile during the past few years. Do you expect this volatility to continue, or has the region stabilized?

I think that as these markets mature, they will become less volatile. But the granddaddy of them all, mainland China, is a long way from maturity. So I guess my answer would be to expect continued volatility.

We emphasize the risks inherent in this region, but firmly believe in the long-term returns.