China: Worst Yet to Come

"There's only $9 billion of foreign investment in China -- it's nothing -- but the Japanese viewed this as a broader global phenomenon and then took action which subsequently re-enforced this idea," he says. The panic subsequently spread "from China to Asia to the yen, and then to the rest of the world, but there's no particular reason why. It's bizarre."

The sector seen as most at risk by Asian analysts is financial institutions, in particular those with Chinese exposure, because of the new uncertainty over loose monetary policy there. Big fees generated from Chinese mega-IPOs last year are also likely to dry up, which could affect some international investment banks.

Last year, UBS co-managed the $9.8 billion IPO of Bank of China along with Goldman Sachs; more recently, it was hired to help with the flotation of China Railway Engineering Group and Wuyi International Pharmaceutical. UBS also took a $500 million stake in Bank of China earlier this year.

Spencer says that it will take a long time for a proper recovery to materialize.

"This started a little earlier than we expected, but markets in China and India will continue to sell off another 10% to 15% now for the next three to six months, and then they'll go sideways for the next couple of years," says Spencer. "It will be a slow recovery from here."