"I don't think we'll see a continuation of the bull market in the short-term. If anything we'll see a slowdown," said Stewart Aldcroft, director of sales and marketing at Templeton Franklin Investors Services (Asia). John Schofield, technical analyst at Prudential-Bache Securities, said he was watching two key indicators: the Nikkei 225, which could lift the entire region if it broke resistance at 16,400, and US interest rates, specifically the US long bond. On Friday, the Nikkei ended at 16,300.75.

If the US 30-year yield broke through six per cent -- it was trading at 5.96 per cent on Friday -- Asian marketsoutside Japan would suffer, with Hong Kong on the frontlines. "It probably wouldn't trigger a big sell-off around the region, but things are very delicately poised at the moment," Schofield said.

A 25-basis point rise in US rates by the US Federal Reserve was considered less important given that cheaper bonds could spark a buying rush rather than a sell signal on stocks. A more fundamental issue in Asia remains valuations - which is why Aldcroft anticipates little change in the insipid market behaviour until July, when first-half corporate earnings start trickling in and offer the first clear evidence of what recovery -- if any -- has taken hold at the corporate level.

"There are some true believers, but a lot of investors are asking whether they're paying too much for an uncertain future, and whether current valuations do actually represent a unique opportunity to buy into a long-term growth story that certainly won't be as vibrant as three years ago," said Peter Perkins, regional strategist at DaiwaResearch.

However, valuing Asian stocks remains uniquely difficult, Perkins added. In addition to historical problems of poor corporate transparency, absent profits in Asia have rendered even basic tools such as price-earnings multiples meaningless.

Price-to-book, or share price valued against a company's net worth, was a better tool, Perkins said, as was economic value added, which incorporates the opportunity cost of capital. But with interest rates still a wild card, investors remained unwilling to commit regardless of their faith in valuation models.

Robert Rountree, head of research at Prudential-Bache Securities, said lower interest rates triggered a sentiment switch towards Asia that could just as easily turn in its tracks. The rise in earnings forecasts in Hong Kong since January could only justify a 200-point increase in the Hang Seng Index -- and this was offset by a 300-point fall resulting from the small rise in the 10-year swap rate, Rountree said. In the event, the Hang Seng rose 3,900points from its February low to its April peak.