It's been a brutal quarter for Asian equity markets that have seen a
sharp withdrawal of funds
over April-June, driven by concerns over a scaling back of the U.S. Federal Reserve's bond buying program and financial instability in China.
"The Fed is responsible for 80 percent of the sell-off - I think for the remainder it is China concerns. Clearly something is not right in China, and no one knows how to identify it because of the opacity of the political system and the economy," Mark Matthews, head of research Asia at Julius Baer told CNBC, referring to the liquidity crunch in the world's second largest economy.
Greater China markets have led the losses with the Shanghai Composite and Hang Seng Index falling 12 percent and 7.2 percent, respectively, over the June quarter. The heavy selling in mainland markets spilled over to top trading partner Australia's S&P/ASX 200 index, which declined over 3 percent, hurt by a slump in resource stocks.
Why the Emerging Market Bull Run Is Over
the once "darling of investors" Southeast Asian markets
fell victim to heavy selling, with the Philippines, Thailand and Indonesian stock markets declining as much as 7 percent.
In the face of rising risk aversion, crowded markets with high valuations have come under increased scrutiny, driving the sell-off, said Kelvin Tay, regional chief investment officer for Southern Asia Pacific at UBS Wealth Management.
Southeast Asia has been a target of hot money flows triggered by the U.S. Federal Reserve's ultra-loose monetary policy. Thus, alongside the weakness in stocks, the region has also seen a rapid withdrawal of funds from its government bond markets, which has in turn weighed on currencies.
Japanese stocks, by contrast, have remained the most resilient amid the rout in Asian markets. While the index has erased a large portion of the year's gains due to concerns over
Prime Minister Shinzo Abe's longer-term growth strategy
and strength in the yen, the Nikkei 225 rose 10.3 percent in the second quarter.
And experts believe the divergence in performance between Japan and the rest of Asia will continue in the coming quarter.
"There has been a major trend change in the last month - emerging markets are no longer the stars. There are no really good stories left in Asia. The Southeast Asia story is a few years old, a little stale," said Matthews.
"The money will continue to drip out of here, but not in as much of a big wave as it did in June. The story will be much more about a U.S. recovery and Japan will get back on track." he added.
(Read More: Japan's Consumer Prices Stopped Falling in May )