The biggest risk for beaten-down Asian markets is not China's financial instability, say experts, it's a further spike in U.S. Treasury yields.
"If U.S. [10-year] Treasury yields go up from here to 3 percent - that's going to be a disaster for the asset markets in Asia," Kelvin Tay, regional chief investment officer, southern Asia-Pacific, at UBS told CNBC.
"It's going to shift a lot of capital away and it will basically hasten the liquidity movements out of this region," he added.
(Read More: Market Consensus: Get Ready for 3% Treasury Yields)
The U.S. 10-year Treasury yield has risen sharply since the beginning of May, from 1.6 percent to 2.61 percent currently, driven by expectations that the Federal Reserve will begin scaling back its bond buying program as early as September.
The narrowing spread between U.S. and Asian government bond yields, has led investors to sell the latter in favor of safe-haven Treasurys, which in turn has had a negative impact on Asian currencies and equities.
Investors pulled $1.5 billion out from emerging market bond funds in the week ended June 5, according to fund tracker EPFR, while equity funds lost $5 billion - their biggest outflow in almost two years.
(Read More: Why the Rise in Treasury Yields May Be OK)
Meanwhile, Asian currencies have also seen a rout. The Malaysian ringgit, for example, has fallen 4.3 percent against the U.S. dollar since the beginning of May, while the Thai baht has plunged 6.1 percent over the same time period.
The MSCI Asia Pacific ex-Japan stock index has also fallen 11 percent over the past month.