Here we go again! Another sharemarket rout, and all those worries about the future are coming back to haunt investors. Emerging markets suffered their biggest rout in eight years at the beginning of May when they declined continuously for about two weeks. But similar corrections happened twice in the last 15 months, and each time the markets bounced back with more gains. When will investors finally get over it and appreciate the rout for what it is: a buying opportunity.

I’m not saying the falls were pretty. The region’s three biggest markets were hard hit. Tokyo slumped almost 10%, the Hang Seng Index dropped 8.6% and Australia’s S&P/ASX-200 Index lost almost 7%. It was a similar picture in Singapore, Malaysia and Indonesia. The Straits Times Index hit an all-time high of 2,666.33 in the first week of May, before retracing 9% to be back at the same level of early February. Bursa Malaysia’s key index, the KL Composite, gave back 4.4%. The Jakarta Composite Index imploded a massive 14.8%.

Fine.

But look at the run they’ve had! In the 12 months to reaching its 6-year-high the Nikkei 225 had gained almost 60%. The broader Topix Index – which is a better gauge of the overall state of the market – had risen by a similar percentage. Stocks in Hong Kong have also had a stellar run, with a 28% jump in the year leading up to its record high. Australia was up 33%, Singapore 25%, Malaysia 13% and Jakarta 63%. These are incredible gains, when you consider the superlative gains some of these markets made in 2004 and 2005. It was inevitable that the market was going to pull back at some stage, as investors realised their paper profits. As well-known fund manager Marc Faber put it in a Bloomberg interview: “We have a lot of speculative excess in every market. A big correction was long overdue.”

The second reason investors sold out of stocks were based on fear, rather than fundamental, proven problems. The five most-quoted fears are:

1. Inflation. Goods and services got much more expensive in the US in April, compared to a year earlier. They were 3.5% higher, if you include food and soaring energy prices, 2.3% if you do not.

2. Rising interest rates. The Federal Reserve said mid-May that these numbers are too high for comfort, and that they are going to factor that into their decisions on whether to raise interest rates. If they do, companies will be discouraged to lend more money to expand their businesses, and they will have to pay more interest on their loans along with all other American consumers, who have already gone crazy with home loans and credit card debts.

3. A weak US Dollar. Despite appearances, the Bush administration is quietly happy with the fall in the value of the greenback because it makes US exports cheaper to buy. This gives some relief to the manufacturing sector, which employs many American voters, and which has been under pressure from cheaper imports from overseas. But it makes all those people nervous, who look to the dollar for strength.

4. A sell-off by international central banks of US debt. The weak US Dollar is forcing some central banks to diversify their reserves away from Treasuries. That means, they are selling bonds. But the US economy is relying on international investors to keep buying them. If they stop, America’s “credit line” would dry up.

5. The ever-increasing price increases in commodities. The prices of oil and metals have been rising steadily. The last time the price of gold was at current levels, for example, was when Ronald Reagan had just been elected US President. But prices are a factor of supply and demand, and the fear is that if prices keep rising demand might start to dry up.

That’s the theory.

But in practice the keyword to all the above reasons is the word “fear”. There is no evidence yet that investors need to really worry about these issues.

We have seen similar drops on similar fears before, even as the major averages advanced steadily since the terrorist attacks on September 11, 2001. But every time we see a big correction – which has happened every four years since 1990 – investors need reminding that stock markets always beat past records. The charts bear this out very clearly. On a five-year view, the big declines in May appear more as a blip than a serious break in the trend. Long-term investors with a solid financial strategy or plan are not concerned by short-term declines. In fact, they just offer an opportunity to buy into good quality companies that had reached or exceeded their fair value. As Warren Buffett says: “When other people are buying, I’m scared. When other people are scared, I’m buying.”