^{Source: News18}

Markets in Asia experienced a sharp sell-off in the previous trading session, leaving them significantly oversold, according to Stanley Tang, senior portfolio manager at Sumitomo Mitsui DS Asset Management. However, after these steep declines, Asian equities are largely recovering, showing positive movements across the region. Despite this, experts caution that the rebound might face challenges, particularly due to concerns over interest rate cuts by the Federal Reserve and global recession fears.

A Cautious Optimism Amid Volatility

While the markets are showing signs of recovery, Tang believes the rebound may be short-lived unless monetary policies shift significantly. “The global recession concerns are somewhat priced in after the recent market correction,” Tang told CNBC. “But to sustain this recovery, we need a more accommodative monetary policy from the Federal Reserve. Without this, the rebound could be temporary.”

The U.S. Federal Reserve's policy decisions will be crucial in determining the trajectory of global markets. If the Fed is slow to implement the anticipated interest rate cuts, it could dampen investor sentiment and limit the potential for a sustained rally in equity markets. Currently, markets are in a wait-and-see mode, with investors closely monitoring signs of any policy shifts from the Fed.

Opportunities for Select APAC Markets

Despite the caution, certain Asia-Pacific (APAC) markets like Japan, South Korea, Indonesia, Australia, and New Zealand are showing promising signs, according to George Boubouras, managing director at K2 Asset Management. Boubouras notes that the recent extreme corrections have made these markets more attractive, with compelling valuations for investors looking to reallocate capital.

“The steep market sell-off over the past week has created very compelling valuations,” Boubouras said. “For those with a longer-term view, now is a good time to start considering reallocating assets.”

These markets have seen significant price declines recently, making them attractive for value-driven investors. If the global economic outlook improves, these regions could see substantial upside potential, especially in sectors like technology and consumer goods.

A Different Outlook for China and Hong Kong

However, the situation is quite different for some other APAC markets, particularly China and Hong Kong. Both markets are grappling with trade-related uncertainties and the ongoing impact of proposed tariffs. Boubouras maintains an underweight rating for these regions, warning that they have the most to adjust from the new tariffs and trade policies.

“China and Hong Kong are facing significant headwinds due to the tariffs and the broader geopolitical situation,” he said. “Investors need to prepare for more volatility in these markets and may want to tread carefully.”

China’s economy is particularly vulnerable to the shifting dynamics of global trade, with U.S.-China tensions affecting supply chains, tariffs, and investment flows. Hong Kong, as a major financial hub, is also impacted by these changes, particularly as it navigates its relationship with both the U.S. and China.

Navigating Volatility: Patience and Strategy Are Key

The current market conditions have left investors in a state of uncertainty, with many unsure about how long the rebound will last or whether it will gain momentum. Volatility is expected to remain a key feature of the market in the coming months, as trade disputes, inflation concerns, and shifting monetary policies continue to weigh on investor sentiment.

“Investors need to get comfortable with volatility ahead,” Boubouras added. “The markets are likely to experience further fluctuations, and a long-term approach may be the most prudent strategy.”

Global Context: The Impact of U.S. Policies

This market recovery also comes amid ongoing uncertainty surrounding global trade policies. The U.S. Federal Reserve and other central banks worldwide will play a crucial role in shaping market conditions. The continued focus on trade tariffs and their impact on global supply chains also remains a critical factor in determining future market movements.

With the world economy still in a delicate state, driven by inflation concerns and geopolitical tensions, the path forward will be one of cautious optimism. Market participants are advised to stay informed about interest rate decisions and trade policy developments, as these will likely be the key drivers of market performance in the months to come.

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