EQUITIES offer the best protection for your assets against the erosive impact of inflation, a survey of investment experts reveals. A compound inflation rate of 10 per cent during the past decade would have slashed the value of a lump sum by 60 per cent. But banks, the traditional haven of most investors, have provided little protection from its ravages. According to Coopers & Lybrand, Hong Kong's inflation has outpaced bank returns by nearly 300 per cent. A lump sum invested in a bundle of Hang Seng Index stocks over the last 10 years would have appreciated over 500 per cent, well in front of the cumulative 120.2 per cent inflation rate. Analysts said equities were likely to continue their out-performance of other asset classes such as properties and bank deposits. However, they warned that stocks were more volatile and that there was also no guarantee that future returns would beat high inflation. According to the latest consumer price index, the territory's inflation rate is 8.3 per cent despite the slowdown in consumer spending. Angus Armstrong, economics director for Deutsche Morgan Grenfell, said he expected inflation to remain high, at about 7.9 per cent, for the year average. Mr Armstrong said it was unlikely to fall below seven per cent even in the long term due to Hong Kong's high exposure to international trade. Property has traditionally been the best way of protecting money against inflation but the property price slide has put an end to that and the sector remains sluggish. Property prices have slumped 30 per cent during the past year and a turnaround is not expected for another nine months. Desmond Cheung, associate director and property analyst for Vickers Ballas, said: 'If you can only invest in one asset, I would say equities, in particular the financial sector.' He said property prices would probably fall another five to 10 per cent and there was still plenty of uncertainty about 1997. 'Our expectation is residential property prices are still in a downtrend in absolute terms and will only bottom out about mid-1996.' If all went well, prices should rise by about seven per cent a year thereafter but even this would be only just in line with inflation. Bill Tatham, divisional director of Towry Law International, also favoured the stock market. Mr Tatham said a year ago it was an even bet between properties and stocks, but stocks were now clearly the better option. 'Residential property will be unlikely to offer as good a level of returns as a basic basket of Hong Kong stocks over the next five years.' Mr Tatham said.