Asian equities have had a dream run over the past three months with some markets in the region seeing double-digit gains, and strategists expect bullish sentiment to spill into next year.
Increased liquidity, easing worries over the global economic outlook coupled with attractive valuations and strong fundamentals should take Asian markets to greater heights, said experts.
"Although Asian markets have done well this year, we continue to favor Asian equities because valuations are not expensive and the region enjoys superior fundamentals and growth prospects compared to other major regions," Vasu Menon, vice president of wealth management at OCBC Bank told CNBC.
Even though some indices like Hong Kong's benchmark Hang Seng Index and Thailand's SET ave risen over 10 percent since August, overall valuations in Asia are still low. The MSCI Asia ex-Japan Index, for example, is trading at 9.5 times forward earnings, compared to its historical average of 12.5 percent.
As Asian growth stabilizes and central banks in the region turn more accommodative, equities are likely to lure more investors, according to strategists.
"Interest rates are likely to stay low, or head even lower, and this should boost interest in Asian equities that offer good yield," Menon added.
Emerging markets have already seen a flood of fund inflows since the announcement of the third round of quantitative easing in the United States in mid-September. Emerging market equity funds took in over $1 billion during the week ended October 17, according to fund flow monitor EPFR, extending their inflow streak to six straight weeks.
Shane Oliver, head of investment strategy with AMP Capital, said that while the market could see a short-term pullback, due to uncertainty over Spain's debt situation and the looming U.S. fiscal cliff, Asian markets will end the year higher.
"Investors should ride out any pullback, because it will get better next year. The economy has gone through its weakest phase and the worst is likely over for China. Economic growth will pick up in 2013 and drive corporate profits higher next year," Oliver added.
All Eyes on the Yen
Mikio Kumada, global strategist at LGT Capital Management, who is more cautious on his outlook for Asian markets, said he has his eye on one indicator to determine whether the rally in the region is sustainable: the Japanese yen .
Further weakening in the safe-haven currency to above 80 against the U.S. dollar is a sign that risk appetite is increasing and that investors are expecting some easing from the Bank of Japan.
"If the Bank of Japan becomes more aggressive, it will be a big positive for Asian markets," he said.
(Read More: Does the Yen's Pullback Take the Heat Off Bank of Japan?)
Over the past two weeks, the yen has depreciated 2 percent against the dollars on expectations that the central bank will loosen monetary conditions at its upcoming policy meeting on October 30 to help lift growth.
While most of the markets in Asia have enjoyed robust growth, equities in China and Japan have lagged behind their regional peers.
The Shanghai Composite has fallen 2.2 over the last three months, while the Nikkei 225 has risen just 4.2 percent compared to double-digit growth in some other regional markets.
However, Marc Faber, author of the Gloom, Boom and Doom recommends gaining exposure to the two markets, which he believes could surprise investors in the coming months.
"I think China and Japan could rebound, if Greece could rebound by 65 percent, believe me," Faber told CNBC on Monday. "I'm not saying China's economy is improving, on the contrary it's worsening, but the asset allocators see this market up, and that market down, and suddenly money shifts."
(Read More: Risk Is Back as Fund Managers Turn Bullish on Equities)
Faber is not alone in his call for increasing exposure to Chinese stocks; both Menon and Oliver point to Shanghai-listed A-shares as their top investment opportunity at the moment.
"The Chinese equity market is one market that investors should keep their eye on. Earnings and economic growth expectations are also very low and could easily be exceeded if China enjoys even a modest rebound in growth in the coming quarters," Menon said.
Oliver added stabilization in China's growth and the country's upcoming leadership transition in November – which is expected to bring about more economic reform and policy easing – will provide a longer-term boost for mainland equities.
—By CNBC's Ansuya Harjani