Asian indices are closing out the first quarter on a bright note, with key markets seeing double digit gains. On Friday, Hong Kong shares ended their best quarter in two-and-a-half years, the Hang Seng up by more than 11 per cent and its China Enterprises Index up 7 per cent for the period. However, China is lagging behind, with the Shanghai Composite up by just three per cent for the quarter. Looking ahead, market-watchers say there are twin concerns of a slowing economy and renewed inflationary pressures. \"The political uncertainty ahead of leadership reshuffle, the renewed concerns on economic hard-landing, and also the accounting irregularities issues uncovered in this results seasons. Those are the major issues why the market has corrected six to eight per cent in March,\" HSBC head of equity strategy Steven Sun said. With the financial markets starting to price in concerns about a slowdown in China, the Chinese central bank came out to say that it will continue to keep growth at a relative fast and steady pace and keep prices stable. HSBC is making one of the more bullish calls on the street, raising its target up for both the Shanghai Composite and the H-share index, believing that the earnings cycle is about to turn. \"The People\'s Bank of China will likely play some catch-up in terms of monetary easing,\" Mr Sun said. \"Our economists are talking about 250 bips RRR cuts in the second quarter, and also one possible 27 bips interest rate cut towards the end of the second quarter. \"As a result of that, we do expect end demand to improve, a very positive driver for margins as well,\" he added. HSBC predicts that within this year, the Shanghai Composite will move up to 2,800, implying a return of some 23 per cent from current levels. HSBC also sees Hong Kong\'s H-share index, or China Enterprises Index, climbing towards 13,000 or 21 per cent higher. HSBC is overweight policy sensitive sectors like energy and industrials, as well as consumer discretionary sectors.