With Asian markets stuck in a holding pattern, further downside is an opportunity to add risk to portfolios, HSBC said in its second quarter equity strategy report.
"We continue to like markets and sectors that are under-owned, offer a good long-term growth story, where earnings could surprise on the upside and trade at reasonable valuations," HSBC strategists wrote in a note.
HSBC upgraded Singapore to 'overweight', saying it is one of the more stable, low beta Asian markets with low earnings volatility, and raised Thailand to 'neutral', partly reflecting valuations that looked better than other ASEAN markets.
It reiterated the 'overweight' rating on Indonesia due to the country's resilient growth model and favourable monetary policy while remaining neutral on Malaysia, citing the pre-election government hand-out, ongoing tightness in labour market and low interest rate as being supportive to consumption.
The bank kept 'underweight' on the Philippines, which is seen as one of the world's most expensive equity markets. The Philippine main index has risen 17.3 percent so far this year, Asia's fourth best performer.
1631 (0931 GMT)
(Reporting by Viparat Jantraprap in Bangkok; Editing by Jijo Jacob)