Asian domestic consumption a dominant theme

Institutional money managers are focusing on domestic consumption when it comes to Asian markets, with other themes like demand for commodities and infrastructure build-out taking a back seat.

Russell Investments senior research analyst Sarah Lien, who is based in Singapore, said financials stocks in Asia were looking particularly attractive.

She added that macro dynamics and company fundamentals in the Asian region were much stronger than those in the rest of the world.

"Those managers that are more focused on specific stock fundamentals are finding the market volatility very exciting. They're finding stocks that are being overvalued as people are focusing on problems in the US and Europe," she said.

However, Russell Investments chief investment strategist Andrew Pease said he had been watching the sovereign debt problems in Europe, and particularly Greece, with "increasing alarm".

There are huge institutional and political barriers in terms of getting effective bailout packages for Greece into place, Pease said.

"With Asia being a high-beta market, it would react quite heavily to a risk aversion event coming out of Greece," he said.

But if the European authorities acted quickly with a significant policy response, coupled with European Central Bank possibly acting as the "bond buyer of last resort", it would potentially create a market 'bottom' for Europe's economic woes.

"Provided we don't see an export collapse and a global recession of the type we saw after the Lehman collapse, then Asia is well positioned to be an outperforming market from that period onwards," Pease said.