Emerging markets as a bloc in the past ten years captured investors' imagination, and individual countries were less important, Shen said.
"Looking forward, the basis for the story will be nuanced. Which country, sector and even company you invest in matters quite a bit, so divergence and dispersion will become very important."
New leadership agendas
The transition is driven by leadership changes in Asia's four largest economies, which occurred in the past 18 months. All have structural reform agendas, which, if carried out with a degree of success, will reshape the regional economies.
"As governments implement reforms, there's a growing recognition that business models at the company level have to change," said Andrew Swan, BlackRock's head of Asian equities, adding that divergence in companies and industries in Asia is underway.
"Across Asia, idiosyncratic opportunities are emerging. Companies are looking for new growth drivers and new management teams that understand that.
"We can get returns from our portfolio by focusing on particular sectors. Even within sectors the dispersion between individual leaders and those companies restructuring we're finding opportunities across Asia.
"With portfolios we're adding a lot more risk at the stock level. We're looking for individual turnaround stories," Swan said.
Reforms and investment
Government reforms are linking with valuations, and the dislocation between the two will open up opportunities, Shen added.
Political reforms are trending around 5-10 year cycles while markets have a six month investment horizon, he said.
"There will be higher highs and lower lows because there will be periods when people may think reforms are not coming through. So in between these cycles, there's an opportunity to trade."
India regaining some shine
India's economic growth rate fell mainly due to a drop from the investment side, public and private, said Neeraj Seth, head of Asian credit.
"In the short term, the next one-three years, we don't need significant reforms, we need an unlocking of growth.
"India's has 8% of GDP in projects that are stuck in the pipeline. Get those cleared and it's easy to get 100 basis points [of economic growth]. That gives growth for the next two years and buys some time for longer term reforms.
Reforms are critical, Seth added. "In the long term they play into the divergence story. The market will reward those countries that take the path to reform."
Swan also pointed to emerging strengths in India. As economic growth picks up in India, inflation is coming down due to falling commodity prices, particularly oil.
"In the next couple years, we think India has a pretty good chance of accelerating growth together with decelerating inflation," Swan said. "That is the ideal environment for equities.
"India really hasn't had that [synchronization] in the past. The next three-five years could be a sweet spot for Indian equities."
China inching forward
In China, where structural reforms are underway, Helen Zhu, head of China equities, was optimistic that government efforts were moving in the right direction.
She also said China's GDP growth today is far less correlated with global GDP growth than ten years ago, as the shift toward a domestic consumption-driven economy continues.
"In the next five years, property will make less of a contribution and infrastructure will make a greater contribution to the economy," Zhu said.
"But the move will be away from highways on the Eastern seaboard and more toward underinvested areas such as railroads, environmental projects, water projects and social housing."
However, Swan believes that India's reform agenda will be easier to push through than China's. India has a more favourable backdrop: strong demographics and less debt issues than China.
"That's reflected in the pricing. China trades on single digit multiples and India trade on double digit," Swan said.
New Disruptors
Technology disruption has huge implications for emerging markets and world trade in general, Shen said. As an example, he cited print-on-demand technology eliminating intermediaries in manufacturing.
“In the next disruption, the middle man will be in trouble if he’s not adding value.”
A new framework is emerging globally that will have a shakeout effect for those companies not at the cutting edge of technology innovation, Shen said.
As an example, he said his team spent time in Australia with the CEO of a mining sector company that uses advanced technology and "big data" in its operations. The company has a mine in Mongolia and when a mine shuts off there, “they know it in Australia before the people in Mongolia know it.”
Despite the fundamental changes underway, emerging markets will remain attractive from an investment perspective.
"Emerging markets will still be a high beta, high risk, high return type market, but the picture will be much more nuanced," Shen said.
