Nomura sees China usurping Japan to become the leading market in terms of index composition. The relationship between the U.S. and North Korea will also have a significant impact.

The Japanese Investment Bank Nomura sees China usurping Japan as soon as 2023 to become the leading market in terms of index composition, according to a equity strategy note to customers on Friday.

«Coincident with this change, we see country-specific valuation metrics beginning to converge. Cheaper markets like (South) Korea will be natural beneficiaries. We also expect (South) Korea to replace Australia as the region's third-largest market by the close of this year,» Nomura writes.

Expect the Unexpected 

The on again-off again Singapore meeting between U.S. President Donald Trump and North Korea's Kim Jong-un could also have a significant domino effect on the recalibrating of Asia's major equity markets. Should the shuttered country yield to international pressure and give up its nuclear aspirations in return for economic assistance, North Korea would be supported by agencies such as the World Bank and the IMF.

Given that positive scenario an era of economic development could erupt in North Asia. A new manufacturing and consumer hinterland could be created with opportunities for companies listed in South Korea, China and Japan, Nomura says.