“Higher inflation and higher rates benefit growth-sensitive markets, such as Korea and Taiwan and general asset plays like Hong Kong,” according to a report by Citigroup analysts led by Markus Rosgen. “Inflation shifts profits from consumption towards manufacturing and, as such, cyclicals and commodities do relatively better than consumers-defensives.”

The pace of price increases in Asia during the current economic cycle is running below levels during all but one of the past seven cycles, the note said. Data since 1975 show the period of “elevated” inflation may last for about three more months before the pace begins to moderate, so concern price increases are out of control “will pass,” the note said.

Inflation is “running at a lower level than we’ve seen during prior cycles,” said Rosgen. “Inflation fears will subside, equities will look good value and in the absence of alternatives, equities will win out.”

A study of the last seven interest-rate cycles in the U.S. shows technology stocks, industrials, basic materials and real estate companies were among the best performers in Asia 12 months after the second increase in borrowing costs, the note said. Citigroup advised investors to “avoid” South Asia, consumer and utility stocks, and “underweight” the Association of Southeast Asian Nations.