Growing hopes for three key areas of economy

Paul Mumford, from Cavendish Opportunities Fund, said these stocks could perform well as companies fare slightly better than feared by analysts. He also forecast a surge in the share price of oil and gas companies and said these would "shoot the lights out" long-term.

Neil Veitch from SVM UK Opportunities Fund tipped China to achieve growth of up to eight per cent, down from the previous highs of 10 per cent but well above the rate expected in western Europe. He also warned there would be another year of uncertainty for taxpayer-funded institutions Royal Bank of Scotland and Lloyds, the owner of HBOS.

The two men were among five analysts giving their verdicts on the year ahead at Unique Boutiques, an investment conference held yesterday at Rudding Park, near Harrogate.

Mr Mumford said a drop in the market presented opportunities for investors and said shares in housebuilding, retail and defence companies could do well as the sectors escape the worst expectations of bearish commentators.

"Nobody thought anybody would spend any money on defence but America has started spending again".

Britain could also see a modest bounceback in property, he added,

"Two or three years ago I would not have been in property companies. Now I would hope that property values would recover a little bit. There is really good value there and there could be takeovers in that marketplace."

Yesterday, Barratt Developments, Britain's largest housebuilder by volume, said its selling prices rose in the final half of 2010 but activity was hampered during a difficult December.

Some medium and small oil and gas companies operating in the North Sea and Africa would also grow, Mr Mumford added.

"I expect these to shoot the lights out over time."

Mr Veitch, investment director at investment boutique SVM, tipped oil to rise in price as technological change and population growth in the Far East drove consumption.

"We think oil will continue to get higher (but) we don't think it will get to $150 a barrel."

He highlighted Gulfsands Petroleum, Premier Oil and Tullow Oil and said: "These companies have cash flow and assets and are not beholden to the whims of the capital markets."

Mr Veitch, who used his presentation to quote the dictum of Mae West and Warren Buffett that "you can have too much of a good thing", also said SVM would look at certain mining stocks but only where there was a "company specific story".

"We are more cautious on the mining sector generally."

The determination of policymakers to get inflation under control means it would be a "challenge" for China to hit annual growth of 10 per cent, he added. He said expansion of six to eight per cent was likely and that it would be dangerous for fund managers simply to "extrapolate from linear trends" and expect the performance of China and emerging markets to continue unchanged.

Michael Lai from INSYNERGY Absolute China Fund put the Communist nation's growth at similar levels, of seven to nine per cent, and said he had been looking at shares in British banks Standard Chartered and HSBC as well as Bank of East Asia. INSYNERGY is chaired by Dragons' Den investor James Caan.

David Coombs, investment director at Rathbones, who was speaking before debt-ridden Portugal cleared a major hurdle by raising e1.25bn (1.04bn) in a bond auction, warned of more problems in the eurozone. Fears remain Portugal could need a financial rescue despite its success in borrowing yesterday.

He said: "We think there is going to be a further sovereign collapse and the euro will be under strain."

Bruno Lippens, from Pictet Global Equity Income, said investors should look for infrastructure stocks and those which paid a high dividend. He said there were opportunities in regulated industries such as utilities, railways, telecoms, pipelines, toll roads and waste management and said Pictet would avoid investments in financial, pharmaceutical and consumer goods companies over the next year.

When questioned all the experts said they invest in their own funds.

It's like flying an aeroplane...

Paul Mumford, from Cavendish Opportunities Fund, said his experiences when he started his career in the 1970s showed that parts of the stock market could see growth return very quickly even if there were still significant problems in the wider economy.

"It was the three-day week and people were putting baked beans under the floorboards. (Then) the market turned and turned very very quickly," he said.

In a lighter moment Neil Veitch from SVM UK Opportunies Fund said: "Managing an investment portfolio has been compared to flying an aeroplane: there are lots of factors to take into account but safety is paramount."