Asian funds have joined their developed market counterparts in the struggle to cope with a slowing US economy, investment research provider Morningstar has found. 

Although emerging markets appeared to be coping well during the second half of 2007, funds in the Morningstar Asia Pacific (ex Japan), India and China equity categories have begun to underperform in 2008.

According to Morningstar, the way in which Asian stocks have started to mirror the US, European and UK markets, suggests that US volatility has reached the Asian shores, refuting the de-coupling theory – which proposes that countries such as India and China would largely remain unaffected even if the US went into recession, as intra-regional trade and strong internal demand levels will keep them afloat.

In January, China was the worst performing equities market in the world, down 21%, while India lost 14.5% of its value in a month. This contrasts with the figures for the third and fourth quarters of 2007, when Indian and Chinese markets led their US counterparts by a significant margin.