Although some investors have reduced their exposure to the equity market, portfolio managers say that mainland equities provide reasonable valuation and are set to outperform other equity markets. Investors are still holding onto their cash though, and have not been tempted to inject sums of cash in equities for short-term gains and long-term capital growth. Conservative investors are happy with a small percentage growth in their portfolios. Banks, such as the Standard Chartered Private Bank, are targeting 3per cent to 4 per cent returns above the fixed deposit rate for moderate risk clients in their portfolios. But they might be missing out on potential long-term gains by staying out of equities altogether. Private bank strategists believe that the global economy has stabilised as correlations in different markets have shown signs of returning to reasonable levels, which is good news for portfolio diversification. Since the start of the credit crisis, investors have become more cautious. Some have only bought fixed income products, such as bonds, while others have stayed in cash, waiting for further opportunities. Lionel Kwok, Credit Suisse Private Bank, head of investment solutions for North Asia, said investors should look at emerging markets and consider gradually increasing exposure to these markets. 'We have clients that maintain high liquidity: up to 50 per cent in cash in their portfolios,' Mr Kwok said. 'Some of them would like to trade in and out of equity markets and structured products to pocket a bit of the trend movements. But they haven't committed a lot of excess liquidity yet.' The bank suggests that investors allocate a smaller proportion of cash - about 10 to 20 per cent - into equities on a stacked basis at different market levels so that they don't miss out on the opportunities for attractive returns over the longer term. Equally cautious about the equity markets is Manpreet Gill, Asia strategist at Barclays Wealth, who said shares on the mainland, Singapore and Hong Kong offered good value. 'Globally, we expect the equity markets to start to recover. We are still recommending underweight in the portfolios,' said Mr Gill, adding that investors could focus on those markets that would benefit first from the recovery.