Merrill Lynch typically adheres to its quantitative-investment model when allocating funds among stock markets in Asia-Pacific. This month, the firm deviated from the strategy by upgrading China, Hong Kong and Australia while downgrading India, Korea and Singapore. "Simply stated, our model assumes a rational market, whereas events of three standard deviation proportions are occurring, all around the world," said Mark Matthews, a strategist at Merrill Lynch in Hong Kong.

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