With global economic growth expected to remain modest in 2013, investors should look at so-called "value" stocks in Asia, which have a potential upside of as much as 20 percent, according to HSBC.
"We are still at the very early stages of a recovery," Herald van der Linde, head of equity strategy, Asia-Pacific at HSBC told CNBC on Tuesday. "So the way we try to look at markets is really that risk is coming off. The way to play that is to look at value. We are looking for about 15-20 percent upside in (these) Asian equities."
And according to van der Linde, Chinese and South Korean stock markets are looking particularly attractive because of their low valuations. The Shanghai Composite is trading at about 10.3 times forward earnings, compared to an average of 24 times over the past decade. The index has also fallen about 1.3 percent so far this year.
The Kospi is trading at a ratio of 9.7 compared to an 10-year average of 18 after gaining 8.8 percent in the year to date.
This compares with a price-to-earnings ratio of 14.1 for Japan's Nikkei 225, which has already climbed 17.6 percent this year.
Both the Chinese and Korean markets should therefore be able to do well in 2013, van der Linde said, as investors will start looking at stocks that have been relatively overlooked this year and which trade at lower multiples.
Some economists are cautious about the global economy next year, saying that growth prospects might not be much better than in 2012. The International Monetary Fund in October, for example, cut forecasts for 2013 global economic growth to 3.6 percent from its earlier estimate of 3.9 percent.
Given this scenario, van der Linde recommends going for stocks of "value" sectors in Asia like energy, technology and consumer discretionary goods and services.
The consumer discretionary sector in Asia is cheaper than it has ever been, according to HSBC. "On a market cap-weighted basis, the sector's one-year forward price to earnings has recently recovered to 15 times from a low of 13 times at the end of July, but still 27 percent below the historical average of 20.5 times," van der Linde said in a report published this month.
His calculations are based on a group of consumer discretionary stocks across Asia that the bank covers.
HSBC likes Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea's Samsung Electronics, which they think will benefit from the growth in consumer mobile devices such as smartphones and tablets. It also likes China's Lenovo and Taiwan's Asustek in the PC space as they gain market share from competitors and boost their margins.
Among energy stocks, the bank likes Tata Power and Power Grid in India as tariffs are expected to go up while fuel costs come down. Among consumer discretionary stocks, the bank recommends Hong Kong's Galaxy Entertainment because of its new resorts coming up in Macau and Italy's Prada listed in Hong Kong, which continues to strengthen its brand against competitors such as Louis Vuitton and Gucci, HSBC said.