Investment strategists are giving sharply differing advice on how Asian investors should respond to the weakening of the US dollar in recent weeks. ING Barings Asian strategists Markus Rosgen and Julian Leung concluded a research note last week, on the back of the depreciating greenback, with: 'Markets are moving higher - stay with the trend.' Compare that to the advice of BNP Paribas Peregrine whose strategy team, led by Raymond Foo, started a recent report with: 'The current softening of the US dollar bodes poorly for Asian economies and markets.' Meanwhile, there's the middle-of-the-road Allianz Dresdner Asset Management, whose chief marketing officer for Asia Mark Konyn does not believe there will be much direct impact on Asian markets from the falling dollar: 'Other than getting securities denominated in the euro, there's no direct play we are looking at,' he said. ING's optimistic argument runs on a number of factors, with the first being historical precedent. Mr Rosgen and Mr Leung say Asia has historically outperformed during periods of US dollar weakness. A weak greenback tends to raise the total value of world trade in terms of US dollars - the same quantity of goods will cost more in US dollars than before. As Asian currencies are closely linked to the US dollar, the value of world trade should also rise in terms of Asian currencies. ING believes Hong Kong will be one of the strongest beneficiaries of the weaker US dollar due to its pegged exchange rate. The weakening of the local currency in line with the greenback will translate into higher import prices. This should boost inflation, which is what Hong Kong desperately needs. Elsewhere in the region the weakening of the US dollar has been accompanied by the strengthening of currencies such as the Philippine peso, the Thai baht and the Indonesian rupiah. Such appreciation makes imports cheaper, lowering inflation - the opposite of the effect in Hong Kong. With lower inflation, central banks can lower interest rates, which reduces the debt repayments of consumers, thereby allowing them to spend more. Consequently, ING recommends focusing on the consumer, real estate and non-tradeable sectors in the Philippines, Thailand and Indonesia. Finally, Asian central banks may ease up on their policy of buying up US dollars for their forex reserves. 'Asian central banks are US dollar junkies,' the ING report said. 'Just maybe, at some stage, we will see a reversal in that policy and currencies will be allowed to appreciate. For the time being ... this looks a long way off.' ING recommends being overweight in Indonesia, Thailand, Korea, Hong Kong and Taiwan. For sectors across the region, ING is overweight in technology, banks and real estate and conglomerates. So how does this differ from BNP, which puts the opposing argument based on the fact that the main destination for much of Asia's exports is the US? A weaker US dollar signifies a weaker US economy, which will buy fewer exports from Asia, runs the BNP argument. 'In the face of an export slowdown ... countries with heavy export-dependence will see a sharper slowdown,' it said. 'By contrast, countries with large domestic demand bases and the ability and willingness to pump-prime their economies through fiscal and monetary measures will be best prepared to weather the export downturn.' BNP examined each Asian economy's reliance on the US in terms of exports, foreign direct investment and tourism as a first step towards determining which would be most affected by the weaker dollar. 'A weak US dollar will reduce US demand for Asian exports, reducing the attractiveness of investing overseas and travelling abroad,' according to the report. The second step was to look at how dependant other Asian economies were on Japan, as the yen faces upward pressure from a weakening dollar. Again, the measures used were revenue from exports, foreign direct investment and tourism. 'The stronger yen can be a boon for Asia, as it encourages Japan to import from Asia, invest and travel to the region,' said BNP. Third, was to look at each country's foreign debt. Countries with high levels of debt in US dollars would benefit most as the weaker greenback would reduce the costs of servicing their loans. Pulling the three strands together, BNP found Indonesia benefited the most because of its debt repayments were cut sharply by the weakening US dollar. Thailand was also a strong beneficiary. Surprisingly, Hong Kong is one of those to suffer the most from a weak dollar, according to BNP's research, due to its lack of dependence on Japan and the fact it does not have any foreign debt repayments that can be reduced. Stocks that should benefit from the weak greenback, according to BNP, are those with US-dollar debt or high yen revenue such as Telkom Indonesia. Hong Kong-listed semiconductor firm ASM Pacific Technology stands to suffer due to a high level of yen-denominated debt and because a substantial share of its revenues are in US dollars. However, some analysts believe not much can be done in Asia to benefit from the weakening US dollar. They have been reaping benefits from Europe, where the single currency has strengthened against the greenback in recent months. 'Investors have clearly done well in holding any euro-denominated assets,' said Mr Konyn of Allianz Dresdner Asset Management. 'Will that continue? We think the dollar is probably oversold in the short term, but the medium-term view is that the dollar will continue to weaken.' Mr Konyn still favours bonds to equities, given the bearish nature of the stock markets and the belief that any recovery in the US economy will be weak initially. 'Short-term we still are sensitive to the downside risk within equity markets,' he said. 'The top-line growth we are not yet seeing come through globally and the US recovery, if it comes, will be modest at a stretch. So in the short-term we are still favouring overweight fixed-income relative to equities.'