The result is a damper on the export industries of Europe and Japan, while export-dependent Asian countries, many of which have already experienced substantial currency strengthening against the dollar, will not be immune to a slowdown. Instead of an outright economic slump, Mr Wong expects a slowing of the rates of growth in Asia, but admits that with a challenging year ahead regional equity markets could disappoint.

'Although Asian economies are likely to grow faster than the global economy, 2005 will see Asian equities underperform compared to global peers,' Mr Wong says.

He cautions that the liquidity that powered regional markets in the second half of this year will eventually slow, possibly at the Lunar New Year. He says many fund managers are privately bearish about the global outlook, but have been acting bullish to take advantage of huge fund inflows.

CLSA chief economist Jim Walker cautions that growth rates around the region next year are going to decline while inflation and interest rates edge higher. The negatives or 'headwinds', as his research report is themed, will slow China's GDP growth to between 8 and 10 per cent, while the rest of Asia is set for growth around 4.5 to 7 per cent.

The big worry, he says, is building inflationary pressure as countries such as China try to maintain the US dollar peg while accumulating huge foreign-exchange reserves in the process.

'Interest rates will more closely follow US rate rises and may even have to move faster,' he says. 'Unless currencies become more flexible this will inflate asset and other prices further, and bring the prospect of a repeat of the Asian crisis onto the horizon some time in the next few years.'

Mr Walker considers higher crude-oil prices are a sign of brewing trouble. Much of Asia is resisting currency appreciation and inadvertently fanning the inflationary flames. If the trend goes unchecked, Asia could find itself in a repeat of the 1997 crisis as prices begin to destabilise.

Another important regional problem is slowing profits growth. Mr Walker is worried that productivity gains will not be big enough to offset the cost increases, which now include rising wages.

'The best days for corporate cash flow are over in Asia,' he says. 'The companies that benefit the most from this stage of the cycle in Asia are banks as other corporates turn more to bank lending for expansion purposes.'

Mr Walker expects a full-fledged recession to hit America in 2006, brought on by what he says are the poor investments that took place after the Federal Reserve introduced a cheap money policy in 2002.

In spite of his gloomy view, he says market players are not likely to catch on until later in the year. In the mean time, they are likely to remain focused on the temporary rebound in US corporate earnings.

JPMorgan chief Asian equity strategist Adrian Mowat believes his colleagues are getting it wrong. It may have never happened before, but he sees the weak dollar and declining interest rates setting the tone for a boom next year.

'There is no historical precedent for what we are about to see in Asia,' he says. 'And the key issue is what is happening in the currency markets. We think we are in a period of currency revaluation in Asia and that is a difficult concept for investors, because the Asia that we have lived with for the last couple of years has been all about strong exporters benefitting from weak currencies.'

Clever investors will have to dig beyond the exporters who dominate regional markets to find companies that feed robust domestic consumption, he says. The payoffs are obvious, with emerging Asian markets forecast to rise by 22 per cent over the next 12 months, according to JPMorgan.

'You should be buying Asian equities aggressively,' Mr Mowat says. 'It is a good economic environment, but the current complexity of the equity markets doesn't reflect this very well. '

His favourite sectors are banks and technology. The former should benefit from currency strength and the latter from a rebound in consumer confidence.

Now that most Asian currencies are set to strengthen, savers will have an incentive to repatriate their capital and channel investment into local assets.

He says Beijing's revaluation of the yuan, expected some time next year, will trigger revaluations throughout the region. In response to stronger currencies, interest rates should fall.

'I'm anticipating a structural change in the demand for equities among local savers,' he says.

He likes Thailand, Taiwan and Singapore, but advises avoiding Australia, where the economic cycle is turning down, as well as Korea, which lacks compelling reflation prospects.