'We have some comfort in that corporate balance sheets are less leveraged compared to history, as gearing is under 20 per cent compared to about 40 per cent during the Asian currency crisis. But headwinds lie ahead for some corporates due to high commodity prices, wage increases in some developing countries and falling demand. Equity markets should therefore be treated with some caution despite the attractive valuations,' Ms Chew said.

A similar cautionary tale was told by most analysts. In their indiscriminate stampede out of equities, investors had dumped both deserving and undeserving companies and now might be the time to look for 'babies that have been thrown out with the bath water', said Norman Villamin, head of research and strategy investments (Asia-Pacific) at Citi Global Wealth Management.

'But if you are going to step into equities in the present volatile environment you should consider a couple of strategies to deal with the risks. First, there is bottom value if you are willing to take a three to four-year time horizon and look for victims of some of the indiscriminate selling over the past week. Here investors should take a bottom-up approach and focus on strong competitive positions that will lead their industries as the global economy recovers, low refinancing needs or balance leverage, bottom of cycle valuations, and high dividend yields to generate return until recovery emerges.

'Secondly, investors looking to participate in the equity market but looking for low to moderate risk exposure on a sector perspective, we suggest things globally like consumer staples or health care where you may find good valuations, solid cash flows, reliable earnings and names that will see you through current crisis quite well.'

But don't expect the high double-digit returns that were commonplace in the past two years, Mr Villamin warned. And be prepared for further volatility in the short term.

'For Asian-focused investors we would focus on things like telecoms for the same reason, namely reliable and predictable cash flows, strong dividend yields and reasonable valuations around the region.'

Equity markets were being torn between two opposing forces, said Pu Yonghao head of wealth management research Asia-Pacific and chief regional economist at UBS Wealth Management.

'We are witnessing a reduction in risk aversion as a result of the relief package and the sense among investors that the financial sector may be oversold. But at the same time concerns remain over continuing economic deterioration and also the performance of non-financial sectors,' Mr Pu said.

But while value might be found in the market mix, there was no certainty that equity markets had bottomed, and against this backdrop investors willing to weather further price volatility might consider a phased return to emerging markets, Mr Pu said.

Though emerging markets were still undergoing 'stress tests' and had yet to prove that they could sustain stable growth despite global economic uncertainties, they were relatively better positioned than mature markets, he said. A retreating oil price, declining inflation rates and sound external balances had opened a window of opportunity for more accommodative monetary policy and thrown low valuations now in markets, such as China, Brazil and India, into focus.

'Price to book valuations for Asia ex-Japan have now fallen some 40 per cent from their peak levels to around 1.7 or 1.8 times. That is not as low as the 1.23 times book value that they fell to during the financial crisis of '97/98, but we do not see a collapse to these levels.'

But risk remained and shares in companies regarded as 'cyclicals' (or closely tied to the economic cycle), should still be avoided.

Fan Cheuk-wan, head of private banking research (Asia-Pacific) for Credit Suisse, said value was now returning to Asian equity markets including Hong Kong and China. While aggressively exposed and highly-leveraged investors would be advised to reduce their risks since market volatility was by no means over, Ms Fan warned, investors armed with cash and a willingness to take risks might consider a return to the market.

'We do advise the more dynamic investor with a stronger risk tolerance and high cash levels to take advantage of present price levels and look for re-entry opportunities among selected blue chips with strong cash flows and high earnings visibility. We also want to highlight China as our favourite market because China shares were excessively over-sold as the market concerned itself with risks of a hard landing. This has taken the MSCI China Index of H-shares and red-chip shares listed on the Hong Kong market to forward price earnings multiples of just 9.9 times versus an historical average of 13.3 times.'

Now on the cards, she said, were further fiscal and monetary policy measures from the Beijing government to avoid any danger of a hard landing for China's economy.

'And this will offer a positive catalyst to support a recovery of China shares,' she said.

Deutsche Bank's Ms Chew echoed this view.

'With Chinese inflation falling over the past few months, China's policymakers are now focused on reviving growth. Reversing its tightening policy over the past few years, the government had already reduced the interest rate by 27 basis points, aiding the export sector and supporting the stock market.