Your Money: Are you ready to chase the dragon?

The tentative recovery of the UK stock market is persuading many investors to return to equities. But while UK shares are only just beginning to look more promising, other countries, notably China, enjoyed strong growth last year.

The tentative recovery of the UK stock market is persuading many investors to return to equities. But while UK shares are only just beginning to look more promising, other countries, notably China, enjoyed strong growth last year.

The MSCI China Free (local) index rose by more than 80 per cent last year, while over the past five years, the average Far East (excluding Japan) investment trust is up 91.9 per cent, says the Association of Investment Trust Companies.

As we break open the fortune cookies to celebrate the Chinese New Year on Thursday, the question is whether these stellar returns for investors can be maintained in the year of the monkey. Most fund managers with Asian holdings remain bullish, expecting the strong GDP growth in China - on average 10 per cent per annum since 1978 - to continue.

The other factor in China's favour is its size: with 20 per cent of the world's population and 15 per cent of the world's foreign reserves, there is plenty of potential. Philip Ehrmann, who runs the Gartmore China Opportunities Fund, believes the country will remain the driver of growth throughout the Asian region this year.

He points to strong indicators that China will continue to attract foreign investment, with the export boom also feeding through to the domestic economy. A consumer society is slowing developing, with huge demand for housing, cars and other durables.

But Michael Watt, manager of Henderson's Far East Income Investment Trust and TR Pacific Investment Trust, believes investors should be aware of the cyclical peaks and troughs that are a feature of the region. And if the US economy starts to slow, this will have a big negative impact in the short term. In the long term, though, he remains bullish, referring to China as "hopefully the biggest equity investment opportunity of our lifetime".

Mark Williams, manager of the Isis Pacific Growth fund, also takes a cautious approach, while predicting that growth in the Chinese economy will remain robust for a number of years. He argues that the growth the country has already seen means Chinese stocks don't look as cheap as they did.

If you fancy the chance of a bit of monkey magic of your own, treat the Asian markets with caution. It can be a risky region, as problems in the 1990s proved.

But those keen to widen an already broad portfolio, and who can also invest for the long haul, will find plenty of opportunities in a range of well-managed, diversified funds.

m.bien@independent.co.uk