(Bloomberg) -- The allure of Asian stocks is fading after beating global peers last year.While 2021 began with investors expecting regional stocks to continue leading the global equity rebound as vaccine rollouts gather pace, that conviction now seems to be in short supply owing to a selloff in Chinese shares and concerns over dollar strength. The MSCI Asia Pacific Index is up just 3.1% year-to-date, compared with a gain of almost 10% each for equity benchmarks in the U.S. and Europe.The recent jump in real U.S. Treasury yields has put a squeeze on risk assets and prompted money managers to rethink geographic and cyclical exposure in their portfolios. Higher yields are also raising the odds of a stronger dollar -- a traditional negative for emerging Asia investors -- just when the worst rout in years in China, the world’s second-biggest stock market, has soured sentiment.“It is hard to see a catalyst for Asia regaining equity-market leadership without a more supportive policy backdrop in China or a reversal of the reflationary market sentiment we have seen in 2021,” said Nick Watson, a portfolio manager at Janus Henderson Investors. “On a regional basis, the 2021 returns from Chinese equities have weighted heavily on the wider index.”Investors are already shying away from making big bets, with intraday swings in the Asian index slipping to the lowest since the start of 2021. China’s CSI 300 Index is down more than 13% from a 13-year high reached in February amid concerns over valuations and potential liquidity tightening in the nation.READ: Chinese Assets Appeal Eroded by Dollar Strength, U.S. RatesMuch of the growth recovery in Asia has been priced in, said Patrik Schowitz, global multi-asset strategist at JPMorgan Asset Management. It downgraded emerging Asia to neutral from overweight “driven mostly by a less bullish view on Chinese equities,” he said.The MSCI Asia Pacific Index was down 0.2% as of 9:42 a.m. in Singapore on Monday.Resurgent VirusAlso hurting Asia’s prospects is a resurgence in virus cases and vaccine shortages in some countries. While investors lauded the region for its progress in containing the pandemic last year, the recent jump in infections in Japan, India, Thailand and the Philippines has weighed on their equity performance.In comparison, nations like the U.S. and the U.K. are much further ahead with their vaccination campaign. Plus some investors see shares in the U.S. and Europe remaining bigger beneficiaries of government stimulus in the near term.Asia “is a less positive Covid story than the U.S. and U.K.,” said Watson. “Unlike other growth markets such as the U.S., investors in Chinese equities are unlikely to find much support from the central bank as authorities try to avoid fueling a stock-market bubble,” he said.READ: More Than 726 Million Shots Given: Covid-19 Vaccine TrackerStill, some are more optimistic on Asian equities. That’s due to attractive valuations, strong growth prospects and expectations that regional manufacturers will benefit from a potential rebound in U.S. consumer spending.“We remain overweight on Asian equities, attracted by an expected 30% EPS growth in 2021, reasonable valuation, Chinese economic strength, and more focus on ESG considerations,” said Sean Taylor, chief investment officer APAC at DWS Group.(Updates MSCI Asia Pacific Index’s performance in the second paragraph, adds Monday’s move in the seventh paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.