There will be bear-market rallies in the near term, but even if markets have bottomed, that does not mean they are going in only one direction from here, according to Mark O’Brien, CIO of AMP Capital Investors.

He said at a press briefing last week that every mood for equities had been telegraphed by what was happening in the credit markets, which seemed to be pricing in a deeper recession than most people are predicting.

Prices suggested that there would be three times more credit defaults over the next five years than there had ever been in history.

“Liquidity is still relatively poor in the markets, indicating that we’re not through the financial crisis. Spreads are starting to respond but they’re not back to normal yet. The equity side is the same story but with a lag.”

O’Brien, who oversees $100 billion invested in Australia and overseas, said the Australian market still represented a good investment environment compared with others, although Asia would do “better than most”.

Kerry Series, who heads the firm’s Asia Pacific equities team (including Australia), said at the same briefing: “I can confidently say that people should invest in Asian equities if they have holding power.”

He said that it was not as much a worry about whether the markets had bottomed or not as what their valuations were.

The price:book ratios were down to 1.1 to 1.2 times throughout Asia, he said. When Asia bottomed in 1983 and in the early 1990s price:book ratios only reached as low as 1.3 times.

“So you’re buying at a level which already discounts recession … The long-term structural growth shift to China and India is still there. Now you get to buy back at valuations which have discounted recession.”