Asia: Time for Spring Cleaning

Within a fortnight, the question in Asia has changed from whether to buy shares at all given sluggish market performance, to what stocks still look cheap. With this seismic shift underway in attitudes toward equity valuations, the week ahead may represent a unique opportunity for investors to restructure their portfolios ahead of the summer.

Since April 21, the Hang Seng has gained 6.1%, to a three-and-a-half month high of 26,241.02 at Friday's close. The Shanghai Composite Index has surged 18.5%, to 3693.11. Japan's Nikkei has risen 5.1%, to 14,049.26, as value buyers have dipped deep into financials and exporters.

But while buying has been supported by strong volumes and lower amounts of short-selling, most strategists and technicians foresee a selloff toward midmonth.

"This could be the mother of all sucker rallies," says Andrew Clarke, a trader at Societe Generale in Hong Kong. "We could be just about to see the emergence of the damage to the real economy when corporate results come out. China has problems with inflation, as does Hong Kong. Arguably, the U.S. has problems, too." ...