The year 2014 will herald increasing uncertainty and heightened volatility among risk assets, in our view.

Collectively, we call for a deceleration of China GDP growth, 30 percent downside in Hong Kong property prices, a rising risk of Fed tapering and event risks around reform policies in China ­�� all of which could add to the volatility.

The greatest risk at the global level would appear to be a stronger US recovery and, thus, faster tapering off of US quantitative easing than currently expected, which would likely favor stocks of Taiwan��s rate sensitive companies but negatively affect property and asset plays, with the impact likely most negative on Hong Kong.

Amid our theme of ��Damned if You Do, Damned if You Don��t�� regarding reforms in China, we expect policy and reform announcements to disappoint either foreign investors or local investors.

Thus, we prefer value, secular stories, consumer discretionary and rail in China while we would underweight materials, [Hong Kong Company Formation & Registration]transport, real estate and telecoms. Our global view has a preference for equities and favors emerging markets over those of developed markets, and North Asia over South Asia.

China preferences

Within China, we prefer the Chinese mainland over Hong Kong but believe Taiwan may continue to represent the safer market of the three to ride out the uncertainty as global growth decelerates with the risk of tighter monetary policy, and to wait out the policy and reform risks expected for China in 2014.

Into the seemingly rising risk of a stronger-than-expected US recovery in late 2013 and early 2014, Taiwan may appear to be better positioned to benefit not only from rising exports to the US but also Fed tapering as Taiwan financial and asset plays have a positive bias toward rising rates.

Conversely, rising rates for Hong Kong present a significant risk, while an improving external economy may empower policy makers within China the flexibility to introduce the reforms,[company registration in Hong Kong, Hong Kong company incorporation] especially in the financial sectors, needed to avert further over-extension of the excessive leverage in the economy.

On a sectoral basis, we continue to like financials, especially in Taiwan, but also the large mainland banks on valuations and selected Hong Kong banks on our expectations of continued consolidation.

We remain more selective in mainland insurers after the rally in the shares, but we continue to like Taiwan insurers.

For both mainland and Taiwan, we like the energy sector as well as the downstream companies in Taiwan.

We are neutral to underweight telecoms, industrials and staples and selective technology (with our preference of mainland over Taiwan tech) as well as in consumer staples and discretionary.

Finally, we remain cautious on materials, shipping, Hong Kong property and mainland property, preferring Taiwan property and construction.