Investment experts increasingly believe that Asia will be the most promising region in the second half of this year and beyond, though they predict a bumpy ride in the equities markets until late summer.
Markus Rosgen, regional strategist at Citi Investment Research and Analysis (CIRA), said more realistic expectations, attractive valuations and an easing of concern about global growth may serve as catalysts for a possible recovery.
Rosgen said that while the next few months may remain bearish for most countries, he sees good opportunities in the Hong Kong, Korean and Taiwan equities markets.
He sees the Hong Kong equity market as a cheap way to access the mainland, and believes it will be the biggest beneficiary of a stable and weaker US dollar, which he said has a history of staying relatively weaker in the second half of the year.
However, he remains underweighted on the mainland. 'About mainland equities, we always say the price is expensive and speculation is high,' said Rosgen. 'Though I'm a bit more optimistic about the mainland's equity market now.'
Trevor Greetham, Fidelity International's director of asset allocation, said he thinks conditions for equities will be more appealing in the second half of the year, ahead of a strong rally next year. He said he had sold equities and commodities, waiting for solid buying opportunities to present themselves.
Trevor sees the world economy on a sustainable upswing. The massive stimulus has been effective and a strong recovery in global growth is under way.
Aberdeen Asset Management reminds investors to pay close attention to valuations, given a vexing global economic climate. It cites high structural deficits and public debt in the West and persistent global imbalances as the key problems. European sovereign risk has heightened considerably this year, and emerging markets may have to consider their response to weaker export markets.
'The global economy faces significant challenges,' said Donald Amstad, director at Aberdeen. 'However, the emerging markets and, in particular, Asia remain bright spots.'
He said that larger Asian economies, with their expanding internal markets, will continue to decouple, and this would support currency appreciation, in particular over the medium to long term.
CIRA head of China research Minggao Shen said the mainland equity market is not an overweight. The ongoing euro crisis and domestic tightening have posed pressure on exporters and domestic investors.
Shen pointed out that recent wage increases and revived currency appreciation would encourage domestic consumption, a goal Beijing has pursued for several years with little success until now.