Paul Matthews and Mark Headley of

Matthews International Funds

aren't party animals. At the end of December, while much of the world was celebrating New Year's or dreading Y2K, the pair were working on the launch of their new

Matthews Asian Technology

fund, which, like its name suggests, focuses on technology companies in Asia.

With the paperwork done in late December, the fund was available for sale in early January. (It is not yet listed, but it can be bought

online.) The timing of the release is telling. After all, observers who feared massive Y2K problems had foreseen a particularly rough time in emerging markets. However, Matthews and Headley believed that Asia would escape significant trouble and that, in any case, the region is at the beginning of a major economic transition involving technology that will take years.

Matthews and Headley are seasoned Asian investors with five other funds, including country-specific ones such as

(MJFOX) - Get Report

Matthews Japan, which is up 111% over the past year, and broad-based ones such as

(MACSX) - Get Report

Asian Growth and Income, up 51% in the past year.

This tech fund caught my attention for a number of reasons. While many mutual funds invest in technology companies globally and many Asian funds invest heavily in the tech sector, the Matthews Asia Technology fund appears to be the only one in the U.S. looking only at Asian tech companies. There's no shortage of companies from which to choose: Matthews and Headley estimate a pool of more than 700 companies with a market capitalization of $2.5 trillion. Many of these have been skyrocketing the past few months, from old stalwarts like

Sony

(SNE) - Get Report

, which has tripled in price over the past year, to new Internet companies like

China.com

(CHINA)

, the dominant Chinese Internet portal, which has doubled in price just since November.

Moreover, while Asia obviously encompasses a vast array of economies at various stages of development, few doubt that the next big trend -- one that's already started -- is the explosion of technology usage in Asia.

"Asia is transitioning from a low-cost producer of tech goods for sale in developed markets to a consumer of those goods," says Matthews. Only 6.8% of Asians own personal computers, compared with 47% in the U.S., and only 1.5% use the Internet, compared with 38% in the U.S. Those numbers demonstrate the growth potential that many companies have. Just this week, the Chinese government reported that Internet usage doubled in the last six months of 1999, from around 4.5 million users to 8.9 million (admittedly, still a very small number, considering China's population of more than a billion).

It isn't just the Internet, either. The percentage of South Koreans using mobile phones rose from 3.7% in 1995 to 48% last year, according to U.S. investment house

Bear Stearns

. Even the financial crisis of 1997 and 1998 didn't slow that industry's growth.

Ironically, however, the technologicalization of Asia, as it were, carries with it the seeds of volatility that may make investing there less attractive, or at least quite hairy.

First, it will undoubtedly bring major social and political changes to the region. For all the lather Americans get into over the growth of an Internet economy and the ways in which the Web will transform society, the changes that the Internet will bring here over the next few years are minuscule compared to what they'll bring to Asia. Consider what might happen in China as more people access the Web and read newspapers from around the world or buy nearly anything online. Do you think the ruling communists will not try to put the genie back in the bottle?

However, the greater volatility comes from U.S. investors, who already seem to be crazed for Asian stocks based more on crowd madness than a solid look at companies in the region. How else can one explain the 3,400% rise in

Pacific Century CyberWorks

, which, as

Philip Segal

wrote this week on

TheStreet.com

, is "more of a business plan than an actual business"? Many investors, blinded by the rise of companies like that and by genuinely positive economic statistics, ignore the ongoing economic problems in the region, such as the glacial pace of banking reform in Japan. Investors will quickly bail at the first sign of trouble or if the

Nasdaq

slides, since many investors are speculating on a correlative effect between the U.S. tech companies and Asian ones.

In fact, since its inception, the Matthews Asia Tech fund is down 11%, a result of recent corrections in Asian markets that followed the early January slide in the Nasdaq. Matthews and Headley, however, believe that volatility will create even more opportunity for the future of Asia -- a time that promises enormous change for the region.

David Kurapka's Trade Winds column appears Wednesdays and Fridays on TSC. In keeping with TSC's editorial policy, he does not own shares in any companies or mutual funds mentioned in this column. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

dkurapka@thestreet.com.