Emerging markets in Asia appear to have stabilized in recent days, but market watchers believe the sell-off is far from over, with one analyst warning that the rout may be just the beginning of a multi-year bear market in the region.
According to Paul Krake, founder of Hong Kong investment firm View from the Peak: Macro Strategies, the winding down of the Federal Reserve's monetary stimulus, widely expected to begin this month, would likely be accompanied by a dovish statement saying monetary policy will be kept easy for a long period.
"That leaves us with developed market central banks that are extremely dovish – Japan, the Fed, the ECB," which will continue to encourage investors to stay exposed to these markets at the expense of emerging markets (EMs), he said.
This will exacerbate outflows from EMs, drag their currencies down further and force central banks to keep their monetary policy tight. "Currency weakness will mean they have to stay hawkish," he added.
The tight monetary policy in EMs, which could hamper growth, adds to concerns over their wide current account deficits and gives investors more reason to sell.
"That's a toxic mix for emerging markets over the medium to long term," he said, expecting the turmoil to last for three to five years.
"This is just the beginning of something very, very structural," Krake, added. "It means a continuation of the developed market over the emerging market theme."
He doesn't expect emerging markets to find valuation support any time soon. "Ex-Korea, you haven't had earnings estimates come down anywhere near enough. You're going to have negative profit growth in India this year; consensus is still 10 to 15 percent. It's just not going to happen."
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Problems in the longer term
Kumar Palghat, managing director of Australia-based fixed-income focused Kapstream Capital, also expressed concerns about the longer-term prospects for EMs.
"Our major concern is, how do you protect [against] capital losses not for the next three months or six months, but for the next 12 to 18 to 24 months," said Palghat, which has about A$6 billion ($5.39 billion) under management.
Since the tapering move indicates interest rates are set to rise, Kapstream has gone "quite defensive," putting 25 percent of client portfolios into cash, he told CNBC.
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But not all of Asia is getting tarred with the same brush. "The ultimate driver is actually the fact that the U.S. economy, the European economy and lately the Chinese economy are doing better than investors had thought," Michael Kurtz, global head of equity strategy at Nomura, told CNBC.
"That growth recovery is clearly creating new opportunities in Asia in more externally focused markets," such as Korea, Taiwan and China, he added.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1