Asia equities may be getting a cold shoulder after a year of huge outflows, but the region could be poised for a massive rally next year, CLSA said.
That's because the price-to-book value – a gauge that measures share prices relative to the value of a company's assets – is trading substantially below their historic averages, according to the brokerage.
"We're way below the average price-to-book valuation for Asia ex-Japan," Amar Gill, head of Asia research at CLSA, told CNBC Wednesday. "There's only been three times in the last 20 years where we've closed the year at similar levels: That was 1998, 2002 and 2008. Each time, the market rallied between 43-68 percent."
However, in CLSA's 2016 outlook report, Gill said that with the current drop in valuation much more drawn out than in the 1998, 2002 and 2008 incidents, the recovery might be only around 20 percent in 2016.
Asian markets have certainly had a tough year: In addition to currencies such as Malaysia's ringgit and Indonesia's rupiah becoming some of the world's worst performing, the MSCI All Country Asia ex-Japan stock index is down around 11 percent so far this year.