Should you bet on the Asia market rally? – CNBC

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“Just as economic conditions warrant a rise in interest rates, U.S. earnings growth starts to fade. Any volatility in US equities could spill-over into Asia later in the year,” it said. “But better earnings visibility in Asia could help soothe some nerves, at least for the time being.”

HSBC isn’t alone in a cautious view on Asia’s markets.

In a note Monday, DBS Wealth Management said it expects equities are likely to continue weakening over the coming weeks.

DBS points to the yen’s bout of strength over the past last week, which it says implies rising risk aversion and unwinding carry trades, or trades involving borrowing in low-interest-rate Japan to invest in higher yielding assets elsewhere.

With the yen’s strength coming despite the Bank of Japan’s foray into negative interest rates, “the market is losing confidence in the ability of central banks to boost the global economy through monetary easing,” DBS said.

That’s threatening risk appetite, it said, bringing the possibility the rising yen and equity weakness could “reinforce each other in a declining spiral.”

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—By CNBC.Com’s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Should you bet on the Asia market rally? – CNBC}