The recent rally in Asia's equities had a solid footing, but it's time to check the optimism, HSBC said in a note Monday.
Over the past three months, the MSCI Asia-Pacific ex-Japan index has climbed 9.0 percent; it fell 10.7 percent in 2015.
"The combination of a weaker U.S. dollar, higher commodity prices, low valuations and, significantly, more proactive policymaking across Asia, especially in China and Indonesia, has led to a resurgence in interest in Asian equities," HSBC said.
The bank expects the move by multiple central banks globally to cut interest rates into negative territory -- sending yields on many government bonds negative -- is also likely to boost appetite for Asian equities.
"Investors are willing to take on more risk when facing a guaranteed loss, so risk-taking is likely to be higher in a world of negative interest rates," it said.
But HSBC advised tempering optimism over Asian shares.
"We continue to see the potential for 2-3 percent upside in Asian equities in 2016, and markets are getting close to this target," it said. "We think the markets may need to take a breather."
It cited negative earnings momentum in Asia, particularly in China and India, with the region's earnings growth for the year expected at around 3.9 percent.
"Corporate profitability needs to improve for there to be a sustainable recovery in Asian equities," HSBC said.
But HSBC also noted that Asia's earnings growth estimates have started to exceed forecasts for U.S. earnings.
"Just as economic conditions warrant a rise in interest rates, U.S. earnings growth starts to fade. Any volatility in US equities could spill-over into Asia later in the year," it said. "But better earnings visibility in Asia could help soothe some nerves, at least for the time being."
HSBC isn't alone in a cautious view on Asia's markets.
In a note Monday, DBS Wealth Management said it expects equities are likely to continue weakening over the coming weeks.
DBS points to the yen's bout of strength over the past last week, which it says implies rising risk aversion and unwinding carry trades, or trades involving borrowing in low-interest-rate Japan to invest in higher yielding assets elsewhere.
With the yen's strength coming despite the Bank of Japan's foray into negative interest rates, "the market is losing confidence in the ability of central banks to boost the global economy through monetary easing," DBS said.
That's threatening risk appetite, it said, bringing the possibility the rising yen and equity weakness could "reinforce each other in a declining spiral."
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1