Meanwhile surprisingly positive data from the US implies an unexpected recovery, which will be helped partly by Christmas and thanksgiving consumer sales.

Domino Effect

Asia’s “dark period” will take a hold over the next six months as the Euro-zone crisis negatively impacts the East, according to Pranay Gupta, CIO of ING Investment Management’s Asia-Pacific division, at a press conference on Wednesday.

“The global economy will head into a slowdown and possibly a recession in 2012, led this time by the Euro-zone. Neither of the previous two crises – the dot com crash and the recession - were completely global. This time, no part of the world will remain immune. We have a crisis in Japan, we have a crisis in Europe, a crisis in the US. Because of the greater synchronization of economic cycles between Europe, US and the emerging markets, and the developed world’s increasing reliance on commodities and oil and take up of debt, there will be a meaningful fallout of the European crisis in Asia.”

He warned: “In Asia, we are at the beginning of what will become a dark period over the next six months.”

Meanwhile Mark Matthews, head of research Asia and Julius Baer, at a press conference last week pointed to the imminent possibility of a property bubble bursting in China, potentially creating a hard landing for the country's economy. He pointed out that the price for a two-bedroom apartment in Beijing along the fourth ring road is close to 3 million yuan ($470,000), while the average annual income of a civil servant is around 100,000 yuan. A lot of property in major cities is unaffordable, and prices have already started to weaken as buyers are forced to drop values. 

"There is a concern falling prices may trigger a crisis among developers and home buyers. Also property is 12 per cent of GDP and 25 per cent of FIA," he added. 

 A pleasant surprise from the US

The US economy, however, is ticking along better than expected, pointed out Gupta. The Conference Board Leading Indicators  show a 6.5 per cent year on year for August, which shows the US is expanding, moderately.

The labour market has been weak, with initial jobless claims running around 400,000 and unemployment remaining stubbornly at 9 per cent. However this is still below the 450,000 mark which would indicate a recession.

And despite a deterioration in business sentiment, corporate earnings are up, profits are at historic high levels and balance sheets remaining extremely healthy. As much as 70 per cent of retail sales will come from Thanksgiving and Christmas buyers, said Gupta. 

Matthews agreed that the US was the "investment dark horse," and that November and December will be the strongest months for them. "Third quarter US data indicates an unexpected recovery and data so far this quarter suggests a similar growth trajectory of around 2.5 per cent, against the consensus of 2 per cent," he said. 

Buy US, Hold (Some) Asia

Both economists had a buy recommendation on US stock but were not as keen on Asian equities, with certain exceptions.

Matthews pointed to the fact that two changes in China, rising wages and currency, mean that light manufacturing will likely relocate to less expensive places in Asia like Sri Lanka and Bangladesh for example.

“These markets are small and unknown, but have a very low correlation to world markets which are in the midst of structural changes. These new markets will make a good long term investment,” he added.

China is harder to call. Although China has had consistently strong GDP growth since 2007, the state's heavy involvement in its largest companies is a heavy burden for them. The Chinese government has wasted around 10 trillion yuan on infrastructure projects like building large towns in outlying areas, only for them to stand unoccupied for many years. 

In terms of property, he recommends steering clear of Hong Kong and buying in Miami, as Hong Kong is very expensive and could be teetering on the edge of a property crash. “Chinese property prices are falling as are those in Hong Kong. A comparison between Hong Kong and Miami shows may similarities, yet Miami property is now fifth of the price in Hong Kong.” He recommended good Miami property as a long term investment.

For specific stock picks, Matthews also likes Japan's Toyota Motor, Thailand's Hana Microelectronics, also Bank of China Hong Kong, and Chinese A shares.