However, in terms of day-to-day to shorter-term correlations, bourses in the region have not fully decoupled from Wall Street, the key barometer on the global stock market scene. Indeed, it might take a long time for the high day-to-day positive correlation to subside because of the flow-of-funds factor from global investors in the region.

Chart 1, above, shows the close correlation between performance of the MSCI Emerging Market Index and the degree and direction of flow-of-funds from global investment in emerging market (EM) portfolios as tracked by BofA Merrill Lynch. Note that fund flows amounting to only a range of 1% to 2% of assets under management (AUM) were sufficient to drive high single-digit moves in the MSCI EM Index. Table 1, above, shows YTD net outflows from EM of US$5.7 billion (nearly half in Asia). The only regions enjoying positive fund inflows were emerging Europe and Africa.

How could such a relatively small amount of fund flows drive stock market trends? Like commodities, changes in stock prices are dictated by demand imbalance at the margin, involving 1% to 2% or less of total supply. At times when market sentiments are macro news prone, marginal flow-of-funds can often be the tipping point for herd psychology to self-feed and buying or selling momentum to snowball. At US$252bn, the aggregate total of regional funds (including ETFs), are sizable relative to market caps of MSCI Index constituents (Table 2), the latter at only 26% (ASEAN) to 55% (Taiwan and Korea) of the actual total market cap of respective bourses. MSCI indexes are the benchmarks or "anchors" of most foreign funds. When an anchor moves, herd psychology does the rest to set shorter-term stock market trends in motion.

Eoin Treacy's view The MSCI Emerging Markets Index has been largely rangebound between 1100 and 1200 since October. It is currently mid range and testing the 200-day MA. A sustained move below 1100 would be required to begin to question the consistency of the medium-term uptrend.

The Asian Dollar Index is probably a reasonable indicator of fund flows into the region. It remains in a consistent medium-term uptrend and a break of the progression of higher reaction lows, currently near 117.5, would be required to begin to suggest that supply is returning to medium-term dominance.

If Wall Street and European stock markets continue to decline Asian indices are unlikely to remain immune indefinitely.