This year thus far: Japan crumbles, Indonesia shines

The best and worst performers in Asia are...

The first quarter has been a mixed bag for Asia's major markets, with last year's star performer turning into this year's laggard in a sharp reversal of fortune.

Japan's benchmark is the region's worst-performing market, down over 10 percent year-to-date following stellar gains of 57 percent in 2013, on growing concerns the government may not to deliver on its promise to put the economy on a sustainable growth path.

Foreign investors sold a net 1.84 trillion yen ($18.1 billion) of Japanese stocks in the year to mid-March, reversing from 2013 when they bought a record 15.1 trillion yen, according to Reuters.

Yoshikazu Tsuno | AFP | Getty Images

Meanwhile, Indonesian equities, which were among the hardest hit amid the turmoil in emerging markets last year, made a solid comeback, emerging as the region's top performing market this year.

The Jakarta Composite is up 10.8 percent year-to-date – after declining 1 percent last year – boosted by a combination of factors including an improvement in the country's huge trade deficit, a string of upgrades in corporate earnings forecasts and upcoming presidential elections in July.

(Read more: India and Indonesia: Not so bad after all?)

Simon Grose-Hodge, head of South Asia investment advisory at LGT Bank, says the divergence in the region's market performance is partly driven by punters looking for bargains.

"Overall, investors are in search of value so we've seen a rotation out of the best performing markets and into the underperforming markets. We wouldn't consider it a good medium-to-long term approach, it's much more tactical," he said.

Overall, emerging markets in South and Southeast Asia had a decent quarter. The Philippines' benchmark PSE Composite Index is second best-performer, up 7.5 percent year-to-date, followed by Thailand's and India's BSE Sensex - which have risen 4.8 percent.

Indian shares have been scaling fresh highs in recent weeks as recovery signs emerged and on hopes that the upcoming elections in April-May will spur reforms.

(Read more: Are Indian shares getting ahead of themselves?)

"With India and Indonesia, the outlook there is much trickier, both markets have done well and because of that they have a lot of two-way risk. We would probably defensive as far as both are concerned. There's perhaps better value in their bond market than equity markets at current levels," Grose-Hodge said.

This year's laggards

Markets in the region that have disappointed include Greater China, with Hong Kong's and China's down 6.5 percent and 3.3 percent, respectively.

A number of factors dragged on sentiment. The stability of China's financial sector has been in focus in recent months after a near high-profile failure of a trust product, which was marketed by local lender ICBC, in January. And earlier this month, China experienced its first domestic bond default when Shanghai Chaori Solar Science & Technology Co failed to make an 89 million yuan ($14.5 million) interest payment.

Is it time to go bargain hunting in Shanghai?

Meanwhile, Beijing's reform push has proved negative for several sectors that are heavily weighted on Greater China indexes, including banks and state-owned enterprises (SOEs), say market watchers.

"We know that China is cracking down on credit, which is bad for banks. Meanwhile, big SOEs are coming under greater scrutiny – they are going to get those easy loans or cushy contracts," Grose-Hodge said, adding that he expects their underperformance to continue.

(Read more: China's economic reforms: What you need to know)

Down under, Australia's ASX-200, which is heavily weighted towards the miners and banks, has been stuck in a range over the past few months and will end the quarter flat.

"Since the better-than-expected earnings season in February, it has been fairly quiet on the corporate front, so shares have been impacted by macro concerns such as China growth issues," said Evan Lucas, market strategist at IG. "It's been a zero sum game for the quarter."