■ Three reasons why 2016 could be a year of positive returns. With MSCI Asia ex-Japan up just 1% in 2014 and down 10% in 2015, we highlight three reasons why 2016 could be a year of positive returns.

One, Figure 1 highlights that while MSCI Asia ex-Japan has historically corrected in the run-up to the first Fed tightening in 1994 and 2004 and during the 2013 Fed taper, MXASJ has historically rallied in the six months after.

Two, Figure 2 highlights that MXASJ P/B has dropped to 1.37x. This is the lowest P/B start since 2008-09.

Three, MXASJ ROE appears to be bottoming at 11%.

■ Key risks to our call. With the Fed tightening against a weaker macro backdrop globally and particularly so in China and 2004 (the episode with the 37% return for MXASJ) associated with NJA ROE rising from 10% to 15%, the key question is whether these differences are big enough to negate history. The other risk is whether global policy divergences (Fed tightening versus ECB and BOJ easing) mean the DXY does not fall as it did in prior episodes. We believe a modest 10% return though is still likely.

■ Overweight Cheapest 4. While past performance is not necessarily a good guide to the future, the Cheapest 4 outperformed the Expensive 4 by 7% YTD in 2015. We continue to Overweight the Cheapest 4, which are Korea, MSCI China, Taiwan and Singapore.