Stock markets across Asia may have taken the recent market rout on the chin, but that's left them well-poised for a solid year-end rally, Goldman Sachs said.
"Asian regional stocks have recovered less of their recent decline and appear poised to make up some of this disparity," Goldman said in a note Wednesday.
While the S&P 500 index has recovered 95 percent of its recent decline, the Stoxx Europe 600 has regained 64 percent and the Topix 63 percent, the MSCI Asia-Pacific ex-Japan Index, or MXAPJ, has only regained 32 percent, Goldman noted, adding that the Asian index fell 10 percent from its year-to-date high, set Sept. 3, to its Oct. 16 low, before recovering just 3 percent.
Goldman maintains its year-end target of 500 for the MXAPJ, compared with around 482 currently.
Valuations have also become more attractive in the region, with the equal-weighted price-to-earnings ratio falling to 15.6 times, slightly above the long-term average, down from its recent 17 times, Goldman said. Separately, Credit Suisse said Asia-Pacific shares are trading at 12.2 times 12-month forward earnings, compared with a five-year average of 12.5 times.
Foreign investors pulled $14.6 billion out of Asia-Pacific mutual funds and exchange-traded funds (ETF) over the past four weeks, while other investors yanked another $2.39 billion, according to data from Jefferies.
While the earnings outlook is for modest growth in the region, it should also help to support equities, Goldman said.
"The current reporting season is good enough to support a recovery rally into year-end," Goldman said, noting that with about 25 percent of the regional index companies reporting third-quarter figures, the nine-month earnings are tracking about 76 percent of full-year consensus forecasts, in line with the historical average.
Goldman also sees some policy support for the region, expecting China's economic growth to stabilize after August data disappointed, with modest policy loosening including more accommodative mortgage financing and lower interbank rates.
In addition, lower oil prices are helping countries such as India, Indonesia and Thailand cut their fuel subsidy bills with less of a social, political and inflation burden than had been expected, it noted.
Goldman tips overweight calls on China, India and Taiwan, with underweights on Australia, Hong Kong and Malaysia. It also prefers U.S.-exposed shares over Europe-exposed ones to play the theme of improving U.S. economic growth and a stronger U.S. dollar.
Others aren't as certain that Asian shares, or emerging markets as a whole, look completely attractive.
"What we've had over the last couple weeks has really created a setup where emerging [markets] could outperform" into the year end, Tim Seymour, chief investment officer at Triogem Asset Management, told CNBC Tuesday. "The entire asset class is not terribly cheap despite the fact that it's absolutely underperformed the developed world over the past six weeks."
Valuations in India and Indonesia "aren't terribly interesting," Seymour said, although he believes lower inflation there could bring benefits to those markets.
Indonesian shares are trading at 14.3 times 12-month forward earnings, compared with a five-year average of 13.5 times, while Indian shares are at 16.1 times forward earnings against their five-year average of 14.6 times, according to Credit Suisse data.
—By CNBC.Com's Leslie Shaffer