S-chips

Chinese companies incorporated and listed in Singapore will be an interesting investment category next year. Given that the China market is fairly well picked over, S-chips are an out-of-the-box option.

Strengths: It is probably the only part of the China market where shares have still not come off their fourth quarter 2008 lows very much. So S-chips may be the real hidden treasures in the China market. Through the course of next year, people will start to have a look at some of the stocks and will find them interesting.

Weaknesses: The main problem that investors face with S-chips is building up their understanding of those companies. There isn't a lot of coverage in place on them so that can be a barrier. And also because it is quite a big universe of stocks, among that group there are companies with problems and scandals, so there is a tendency to ignore the whole lot.

Philip Jehle, head of private clients unit, Lombard Odier Darier Hentsch (Asia)

Corporate bonds

Corporate bonds are still a very good pick. This year it was one of the best bond markets ever. And, the longer interest rates stay around 0 per cent, the more investors will pile into this sector.

Strengths: There is still a deflationary world ahead as we don't see governments able to raise interest rates significantly over the next one to two years. So if you can lock in a yield on the next five-year basis at say 3.5 per cent, it still beats 0 per cent on your cash. The yield plus potential capital gain could yield a stable 7 to 10 per cent return and that should beat equities over the long run on a risk-return basis.

And you have got some very good companies issuing bonds for the first time, which had previously relied on banks for their borrowings. If you know the market well, you can pick up fantastic companies that would not dream of going to the bond market but are now forced to do so.

Weaknesses: But you really need expertise on the ground because the dynamics of the fixed-income market is much less transparent than the equity market. Especially in Asia, it is little understood because companies generally prefer to raise money through IPOs or bank lending.

Terry Pan, head of retail business, JP Morgan Asset Management

Mainland property stocks

A good pick over the near term. At the moment, the valuations look fine and the supply and demand situation continues to be favourable.

Strengths: Asset inflation will be a near-term driver as property values traditionally move up in synch with the availability of liquidity and low interest rates. China of all countries is a place where liquidity is not an issue and investors are looking for a place to put their money in. In order to preserve a meaningful level of economic growth next year, Beijing will not constrain fixed-asset investments.

Also, the long-term trend of urbanisation continues to be favourable for the property developers.

Weaknesses: The market is worried about policy risks to developers next year. There has been talk of possible austerity programmes to avoid a possible bubble. But policy risk has always been the hardest downside to quantify for anyone investing in China, be it in the property sector or domestic consumption or anything.

Ian Huen, managing director, Striker Capital

HKEx stocks

Stock in Hong Kong Exchanges and Clearing would be an interesting holiday gift for next year. But as someone who tracks trends for a living, I would give an IOU until HKEx breaks through HK$145 with heavy volume and strong gains in the market because then the investment is much more likely to pay out.

Strengths: It may sound quite different from traditional investing to wait until the stock breaks above a certain trend, but the probability of a huge gain is very big if it breaks on the upside. On the fundamental side, HKEx is a recipient of a huge amount of initial public offering money and increasing trading turnover from locally listed stocks. We are also on the edge of the second and possibly bigger wave of a reflation cycle that could increase those values.

And, HKEx has been directionless in trading for the past four months, so it will likely be directional for the next few months if it breaks through its current ceiling.

Weaknesses: You are waiting for the market to tell you where the trend is going. The problem right now is that nobody knows yet.

It's a nice and simple and executable idea, but it just requires some patience.

Tom Holland, columnist, South China Morning Post

MNC stocks

Stocks in multinational corporations that operate in Asia will be a strong play in the coming years. Everyone wants a slice of Asia's growth and some of these MNCs offer good exposure to that because they earn a substantial share of their revenue from business out here.

Strengths: They have a lot of advantages over local companies because they are cheaper on the whole, have top-notch corporate governance, have steady earnings streams and pay dividends. And, a lot of the MNCs have a dominant market share in Asian consumer markets, surpassing the size and scale of locally based competitors. Yum! Brands, for example, owns Pizza Hut and KFC, which are incredibly popular in China. Adidas and Nokia have huge businesses in this region as well.

Some MNCs may go for listings in local markets too, which would boost stock prices in the future.

Weaknesses: While these companies maintain fast growth in the region, they still have a lot of exposure to the relatively depressed developed markets in Europe and the United States. That may have been over-reflected in their share prices, however, because investors may not have adequately identified the fast-growing part of their Asian businesses. Although some of these MNCs have been hampered by the slowdown in their home markets, they would never pull back from Asia. Quite the opposite, in fact, as many are ramping up their businesses in the region.

Ricky Tam Siu-hing, executive director at Champlus Asset Management

ICBC stocks

I would choose stock in Industrial and Commercial Bank of China. When we compare it to other Chinese banks, its balance sheet is the most conservative and strong. It has enough funding to support its future growth.

Strengths: A lot of people are worried about Chinese banks not having enough capital and that some would have to raise capital. But ICBC has a strong balance sheet.

It has also been a tool for the mainland government to do foreign acquisitions. If it is going to continue to do the acquisitions in foreign countries, it will eventually become a huge global bank. Chinese banks are also modernising to increase their non-interest income businesses. ICBC has a strong position to expand in this area.

Weaknesses: Compared to China Construction Bank or Bank of China, ICBC may not be aggressive enough and so it could have a lower earnings growth. And while it has upside potential, its [share price] may only go up slowly since the market capitalisation is so big.

Olivier Godin, head of commodity derivatives, Societe Generale

Gold

Even at the current level, it is still a palatable investment. There is still some steam in that market.

Strengths: There is a range of ways to get exposure to gold. Today, people like to have something simple rather than complex and something that they know rather than something new that they do not understand. The so-called black box concept doesn't attract people anymore. And if you want to limit your downside risk on gold, you can add some capital structured products on gold.

Weaknesses: If you are a bit more cautious and invest in gold with a guaranteed product where you don't get the full downside, then you won't get the full upside. But for a lot of retail investors that's still palatable.