With mounting concerns over the global economy, investors should steer clear of areas most exposed to a slowdown, including the steel, metal and shipping sectors, even though they had the Midas touch last year, Mr Sanft said.

'Just because you made a nearly 600 per cent gain in the previous two years, there is no reason to go back and touch these stocks,' he said at an investment presentation. 'These stocks have the worst exposure to the slowdown in global growth.'

Even though local stocks are no longer a sure thing, some say that equity prices have not come down enough to compensate for the rise in risk and are still in line with the old bull-market expectations.

'It's not the time to come out and buy in the market because the valuation is not on your side and, in our opinion, we potentially see some earnings downgrade,' said Paul Chan, a fund manager at Invesco Asia. The Hang Seng Index is one of Asia's most expensive benchmarks, trading at 15.49 times earnings compared with Singapore's Straits Times Index at 11.61, Korea's Kospi at 15.08 and the Nikkei at 15.98, according to Bloomberg data.

Valuations are at record highs in the local property sector, and it is important to keep that in mind when trying to decide whether the recent series of aggressive interest rate cuts will be enough to support those levels, Mr Chan says.

If investors are not keen on shelling out for name-brand stocks, they can find significant valuation discounts in small and mid-cap stocks that were overlooked during the market surge last year, he says.

But with the local blue-chips index shedding 15.67 per cent last month alone and 23.75 per cent since its October 30 peak, stock prices are coming down in a hurry.

Hong Kong Exchanges and Clearing, the operator of the city's stock exchange, was the benchmark's big winner last year and has already given up 27.31 per cent in January.

'Valuations have become a lot more attractive,' JP Morgan's chairman for China equities, Jing Ulrich, said at a presentation last week. 'If this sell-off continues for a few more days or a few more weeks, some real value will begin to emerge in the market.'

But with the market as unpredictable as ever, some investors may not be able to wait for clear signs of discounted value and may need to enter into some defensive positions in order to weather the storm.

Despite concerns about the global economy, most investors still agree that the sectors with leveraged access to growth and consumer demand, such as infrastructure, commodities and telecommunications, are the best-positioned for future earnings.

And some say that investing in Hong Kong's neighbour across the border is one bet you can't afford to miss.

'China is increasingly transforming the world as the world is transforming China, and not being invested in China is riskier than being invested in the market,' Burkhard Varnholt, chief investment officer at Bank Sarasin, said.

Infrastructure development in the mainland may be a safe haven for investment because China's rapid pace of urbanisation has generated strong demand for services from that sector, making these stocks less vulnerable to a downturn in the US economy and volatility in China's stock markets. 'I predict that China may continue to do the infrastructure projects in order to maintain the earnings growth after the Olympic Games,' Patrick Yiu Ho-yin, an associate director at Cash Asset Management, said.

The valuations for some of the infrastructure development companies were not cheap, but they might be worth it, considering their expected earnings returns, he said.

True, given all the concerns weighing on the global economy, investors may find it difficult this year to duplicate last year's record returns. But despite losing so much ground already this year, Hong Kong's market was still well positioned, Mr Varnholt said.

'By the end of this year, it could recover what it lost from the peak to today,' he said.'But there are another 11 months to go, and that's a long period of time compared to how fast it mounted.'