Average daily turnover in Hong Kong last week was $13.68 billion, about 30 per cent higher than the average in the past three months, while inflows to other Asian markets including Taiwan and South Korea have also been heavy.

State Street Global Advisors vice-president Steven Chang said a lot of money had come out of Europe, where a tepid growth environment combined with a strong euro made low-priced Asian equities look particularly appealing. 'This year more European funds have come into Asia.'

Mr Chang said research had shown one source of new money coming into the Hong Kong market and other economies in the region was Japanese pension plans which had shown an appetite for regional equities as they moved money out of fixed-income investments.

Mark Konyn, a director at Allianz Dresdner Asset Management, said he had been overweight on Asian equities since the third quarter of last year and that popular sentiment on Asia had been driven by improving opinion on Japan.

'Data coming out of Japan has been encouraging, so there has been a keener interest in the region by US allocators,' Mr Konyn said.

However, not all fund managers are as positive on the prospects of the land of the rising sun.

HSBC asset management director Husan Pai said that despite being overweight on north Asia as a whole, he remained underweight on Japan. In line with other investors, he had taken money out of Europe, leaving it moderately underweight. He was neutral on the United States.

Mr Pai has been reallocating capital into Asia sinse the early part of the year, in particular to Taiwan and Korea. He said he had recently put money back into Hong Kong 'because of Cepa (the closer economic partnership arrangement) and the demand from individual mainland tourists'.

Mr Konyn said another factor driving global opinion was the encouraging macro situation in China, which in turn had given H shares impetus, bolstering Hong Kong's stock market. In addition, sentiment on Hong Kong had improved because signs were building that the worst was behind it and negative equity had hit a bottom.

Mr Konyn said he was overweight on Thailand, Taiwan and Korea, and the next country in the region to attract more investor attention would be Malaysia because of the flourishing level of domestic consumption there.

In turn, a certain amount of capital could move out of Korea because of concerns about credit growth and the level of debt in the country.

Mr Chang said Taiwan had proved particularly popular with global funds following moves to lift limits restricting the amount of capital international institutions could invest in the economy.

He said India was also attracting heavy amounts of foreign capital and would continue to do so despite Monday's terrorist attack in Mumbai, the country's commercial capital.

'People may use the attack as an excuse for profit taking, but because of the scale of the money going into India there won't be any great correction,' he said.

JF Asset Management managing director Richard Titherington said that to a certain extent money had moved out of China because valuations were becoming less attractive there. However, he said the major movement had been investors shifting cash into equities.

It was hard to decisively pin down capital shifting from one place to another, because 'for every account that's going one direction there is another account going in the other direction', Mr Titherington said.