INDONESIA'S ECONOMIC and political collapse has been front page news in recent months. But it's just the latest in a long line of Far Eastern countries - from Thailand to the Philippines - to struggle with financial meltdown. Now the problem country seems to be Japan.

Asia's problems highlight the risks in investing in emerging markets. These offer the potential for exciting returns but the investors also risk wipe-out.

Nevertheless, if you're prepared to invest for the long term, putting a small amount of your portfolio through a unit or investment trust into developing markets makes sense. Excluding Latin America, there are three areas to consider.

The first is the Far East. The pessimists say the area is full of economic basket cases. Others look on the collapse as presenting opportunities to get into markets cheaply.

Many fund managers seem to be taking the latter view. A recent survey by analyst Burson-Marsteller found that a majority of fund managers are increasingly positive about the prospects for the region. "The general consensus is that the worst is over in South East Asia, with the exception of Indonesia," says Simon Eaton of Burson-Marsteller - but that was just before fears grew about a collapse of the Japanese yen and the country announced that it was officially in recession.

The challenge for economies in Asia is to continue the economic recovery. Investors who have money in the region should stay put, but new investors would be brave to invest significant sums. Hong Kong and China seem best placed.

David Prosser

The writer is features editor of "Investors Chronicle".