Asian equities have lagged the global stock market rally since the start of the year, but according to HSBC, Asian stocks could still deliver a 20 percent upside by the end of 2013.
Devendra Joshi, equity strategist for Asia Pacific at HSBC said that based on the current consensus estimates of 13 percent earnings growth for Asian stocks this year, markets could rise 15 to 20 percent.
"We think with all the loose monetary policy and let's say around 4 to 5 percent rerating in the market of the PEs (price- earnings ratios), add to that around 3 to 3.5 percent average dividend yields for Asia ex-Japan and it gives you around 20 percent," Joshi said.
HSBC's call comes even as the MSCI Asia Pacific ex-Japan Index has risen only 2.2 percent so far this year. That compares to gains of 12 percent for U.S. equities, while global stocks measured by the MSCI World Index are higher by almost 8 percent.
Joshi, however, is convinced that Asian equities will pick up steam when earnings are revised up after Purchasing Managers Indexes (PMI) tick upwards to the 53-54 level in the second quarter of the year from the current 50-51 mark.
"We think basically PMIs will rise and we see more earnings upgrades coming as well," Joshi said. "There will be more conviction for analysts that growth is coming back to the region."
HSBC is overweight on the "value markets" of China and South Korea, because they are the cheapest across the region.
"One of themes we have this year is value versus growth, so China fits perfectly into that value category. It's the cheapest in the region and cheap to its own history as well," Joshi said. "Korea usually has been the cheapest market in the region, but right now it's even cheaper compared to its own history."
The MSCI China Index is trading at 8.5 times its 12-month forward earnings, compared to a long term average of nearly 13 times, which is about 35 percent cheaper, according to Joshi. Whereas, the MSCI Korea Index is trading at a ratio of 8.5 compared to a long term average of 10.5, which is more than 20 percent cheaper.
Another reason why Joshi is bullish on these markets is because HSBC believes the China growth story will remain intact in 2013.
"We think that growth will be pretty ok in China overall - there won't be any major disappointments," Joshi said. "We think with China improving and Korea being the major exporter to China, Korea will benefit as well on the back of that."
-By CNBC.com's Rajeshni Naidu-Ghelani; Follow her on Twitter