Following a tremendous streak of double-digit annual returns, the Chinese and Indian stock markets have hit a speed bump so far in 2008. As of April 2, China's Shanghai Exchange was down 36%, and India's Bombay Exchange had given up 22% for the year.

It's been a pretty bad year across the board for the two emerging-market darlings. According to Capital IQ, a division of Standard & Poor's, 103 of the 119 Chinese and Indian stocks that trade on major U.S. exchanges are down in 2008. Those hit hardest include ShengdaTech (Nasdaq: SDTH), China Finance Online (Nasdaq: JRJC), and (Nasdaq: BIDU) -- three stocks that had each more than doubled in the previous year.

Investors worldwide must be wondering whether this is a sign of things to come for stocks in these emerging Asian giants. Nowhere, perhaps, is the debate livelier than on Motley Fool CAPS, the Fool's free and open investing intelligence community, where more than 95,000 investors rate their favorite -- and least favorite -- stocks.

Moving westward?
Even though stocks from other regions, including Europe and South America, have become more common among the top-100 rated CAPS stocks, Asia's growth potential remains too great to ignore.

Without further ado, here are the top five Asian stocks, according to CAPS.



PT Telekomunikasi Indonesia (NYSE: TLK)


Internet Initiative Japan


iShares MSCI South Korea Index (NYSE: EWY)


WisdomTree Pacific ex-Japan Total Dividend (NYSE: DND)


BLDRS Asia 50 ADR Index


ETF = exchange-traded fund.

Please bear in mind that these stocks are not formal recommendations. Instead, they're offered as jumping-off points for further research. Researching five-star CAPS stocks such as these can be an effective tool for investors.

Jakarta calling
PT Telekom Indonesia burst onto the top-rated Asian stocks list following a bullish opinion from Jim Cramer in late February, when he called PT a "triple buy." Seventy-five "outperform" ratings for PT have been entered on CAPS since the episode of Mad Money aired Feb. 26.

So far, however, PT Telekom shares have not outperformed, dropping a full 6.5% versus the S&P's decline of just 1%, but that hasn't stopped CAPS investors from touting the longer-term growth potential of the stock. AlphaMale11 described just a few days ago his investment thesis in more detail:

Indonesia has the fourth highest population in the world. Since only 40% of Indonesians have cell phones, growth potential is great. The company is valued at a mere 13 times earnings in spite of a 21% growth rate and has a 2.6% dividend yield.

This is essentially a summary of Cramer's pitch from the show, but it's nevertheless a good one that helps the average investor understand the opportunity in PT Telekom.

And that's how investors should view the growth of PT Telekom's wireless business: as an opportunity, and not necessarily a given. Sure, the Indonesian wireless industry may be "underutilized" and "underpenetrated," but there's a reason for that. As those of us with cell phones know, they're not cheap, and rates in Indonesia are quite a bit higher than they are here. According to the CIA World Factbook, 17.8% of Indonesians live below the poverty line, Indonesian unemployment sits a 9.7%, the inflation rate is 6.3%, and GDP per capita is just $3,400. These macroeconomic statistics seem to explain the lack of utilization and penetration of wireless services.

While real GDP grew 6.1% in 2007, and with growth expected to remain around 6% this year, the economic conditions in Indonesia could improve to a point where more Indonesians could afford cell phones. As the dominant telecom in the country, PT Telekom will certainly benefit if the Indonesian economy improves, but it might take some time for all this to occur if the global economy slows. Investors would thus be wise to view this stock with a long-term perspective of at least three to five years.

What do you think? Will the Indonesian cell-phone market take off or will macroeconomic factors keep it grounded? To make your voice heard, join the CAPS community. It's 100% free, and we want to hear from everyone.

Motley Fool Global Gains is here to help you navigate the complex international stock markets. A free, 30-day trial to our international investing service is yours with just a few clicks.

Fool contributor Todd Wenning is ranked 296 out of more than 95,000 CAPS players. He does not own shares of any company mentioned in this article. is a Motley Fool Rule Breakers pick. The Fool's disclosure policy is well-traveled.