Fears the China growth woes could knock the global economy have spread turmoil in world financial markets, toppling the benchmark MSCI Asia Pacific ex-Japan index 16per cent this year.
Asia's falling stocks have triggered an exodus of funds from the region, but some investors say the sell-off has been indiscriminate and that certain stocks offer compelling buying opportunities.
The downturn in equities has been exacerbated by steep falls in Asian currencies, which have taken multiple blows from a sputtering Chinese economy, the unexpected 2per cent devaluation of its yuan currency on August 11, and expectations the US Federal Reserve will raise rates by year-end.
Fears the China growth woes could knock the global economy have spread turmoil in world financial markets, toppling the benchmark MSCI Asia Pacific ex-Japan index 16per cent this year.
China's stocks, the epicentre of the global equities shakeout, have plunged around 40per cent from their mid-June peak.
But the turbulence hides opportunities, some funds say, with Credit Suisse estimating net selling in emerging Asia ex-China reached a whopping $19.8 billion in the three months to August 28.
"We don't see weaker Asian currencies as a positive for stock markets," said Andrew Gillan, head of Asia ex-Japan equities at Henderson Global Investors.
"But it's a little bit unfair to tarnish the whole of Asia as higher risk."
Economic growth in Asia is stronger than elsewhere and profits are "chugging along nicely," he said.
Among the winners are Indian technology firms and drugmakers, which source cheaply locally and earn dollars selling largely in the United States.
These include Tata Consultancy and Tech Mahindra, according to Henderson and BNP Paribas Investment Partners.
The former had a three-month gain of 1.9per cent and the latter a 2.7per cent drop by late trade on Wednesday. Indian drug companies Glenmark Pharmaceuticals and Dr Reddy's Laboratories, Taiwanese blinds manufacturer Nien Made Enterprise and Korean garment maker Hansae Co., also fit the bill, according to BNPP IP.
Henderson's Indian pharmaceuticals pick is Lupin Ltd., which has gained 5.1per cent. Lupin gets 43per cent of revenues from the United States, according to BNPP IP.
In the last three months Glenmark has jumped 26per cent, Dr. Reddy's Labs 22per cent, Nien Made 17per cent and Hansae a whopping 63per cent.
The safe haven Japanese yen's 3.5per cent gain this year against the dollar helps Korean carmakers such as Hyundai and Kia Motors, said Josh Crabb, Hong Kong-based head of Asian equities at Old Mutual Global Investors. "If the world improves they'll sell more cars, and if it gets worse, the won goes down further, so it puts them at an advantage relative to Japan," he said.
Targeted buying Consumer goods makers, particularly those that source and sell locally, are shielded from currency fluctuations and can price competitively against imports, Henderson's Gillan said.
Henderson holds Uni-President Enterprises in Taiwan, which has upgraded earnings this year and risen 18per cent.
Taiwanese high-end technology firms, whose products' complexity means they face little regional competition, are also deemed good plays.
BNPP IP is positive on Taiwan's Aerospace Industrial Development Corp., which has lost 1.2per cent this year.
While currency depreciation in a low growth world is unsustainable, "we see this as a good opportunity to buy individual stocks which we have been looking at enviously because of their rich valuations," said Daisuke Nomoto, senior portfolio manager at investment house Columbia Threadneedle in Boston.
"Companies who can finance internally, who have strong balance sheets and/or who have minimal US-dollar debt exposures should be better off," he added.
