Despite the current amount of liquidity in the markets, Asian stocks still face downside risks of up to 15 percent by the end of 2009, said Daniel McCormack, equities strategist at Macquarie Securities.
"Valuations are excessive, the cycle is starting to ease off a bit, the risks in my mind are clearly to the downside for Asian equities, probably about 10 to 15 percent into year end," McCormack told CNBC's Asia Squawk Box.
"There is going to continue to be a tailwind from money flows but I do think markets will fall despite that. And the reason is that the risk/reward at these kind of levels is poor," he said.
At current valuations, you have got about 2x price to book, about 14.6x forward earnings for Asia-ex, if history is a guide, your odds of losing money, whether you are a three-month or 12-month investor, are over 60 percent based purely on valuations alone, he explained.
"(The) key cyclical indicators that I look at are now starting to turn down," McCormack revealed. Things like earnings revisions, the U.S. earnings season, new orders minus inventories series, and the OECD leading indicators, though it comes out with a significant lag, could well be turning down, McCormack said, and that could easily happen in October.