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According to Western Asset Management, despite the rapid run-up in prices in Asian financial markets and concerns about the sustainability of this, investors will continue to invest in countries such as China, India, Korea, Singapore and Hong Kong.

Rajeev DeMello, head of Asian Investment at Western Asset Management, said: "Many markets are only starting to return to normal and should continue to benefit from sounder economic news.

"Forward-looking indicators of economic recovery in the region have been encouraging. Purchasing managers surveys in China, India, Korea, Singapore and Hong Kong have rebounded strongly, confirming that the worst of the recession has passed.

"Managers are now expecting growth after months of slowing orders."

Furthermore, Asian currencies should benefit from the more positive sentiment in the region and from the weaker US dollar. For example, an end to the recession should be negative for the USD just as the rise in risk aversion contributed to the dollar's strength during the second half of 2008.

As the capital markets have normalised during the past four months, USD interbank lending rates have fallen significantly along with demand for dollars and DeMello claims this movement will continue as conditions normalise.

DeMello said: "Short-term bond yields in Asia are likely to rise modestly as the market believes that policy rate reductions are all but over. Investors will likely shift their focus to the timing of policy rate increases.

"Asia should continue to benefit from the improved global risk sentiment. Equity flows into the region have increased and these types of movements usually last for more than a few months. We believe that Asian currencies offer value at current levels as they typically rally when the region recovers."