Key Points

It said that US tariffs will have little impact on the profits of most listed companies.

Although foreign funds have withdrawn significant amounts from India in the last 12 months, a period in which the market has seriously underperformed, local investors have remained resilient, according to the report.

"While earnings growth expectations can fall a little further, valuations are no longer a concern, as the government policy is becoming a positive factor for equities, and most foreign funds are lightly positioned," the global investment research firm said.

Foreign investors remained net sellers in Asia this year, which is typically unfavourable for regional stock markets.

Yet the market is up by an average of 20 per cent due to cash inflow from local retail investors. However, after a strong run in Chinese equities, especially in Hong Kong, further momentum is uncertain.

"Valuations are elevated, but not excessive. However, with retail investors sitting on $22 trillion in cash, some of which is gradually being re-allocated to stocks, we expect Chinese equities to grind slowly higher," HSBC stated.

In Japan, Korea, and Taiwan, investors are interested in playing AI through these markets, especially in Korea and Taiwan, which are now very crowded trades.

Valuations have run up and in Japan, the weaker Yen has also supported equities.

Corporate governance is a positive long-term theme in Japan and Korea, but it won't carry markets on its own. After the recent run-up in equities, we downgraded Korea to underweight in mid-August.

"Meanwhile, ASEAN's investor confidence is low. Politics dominates the headlines in Thailand and Indonesia; for the latter, fiscal prudence is on the radar screen after a cabinet reshuffle," the investment research firm said.

- IANS