Stick to Defensives, Recovery Seen Mid-2009

The market turbulence this year has left investors wondering how things will shape up in 2009.

Two analysts on CNBC's "Protect Your Wealth" both expect a recovery in markets by the middle of next year. Their best bet? To stick to defensive stocks.

Huang Yiping, chief Asia economist at Citi said investors should buy into large-cap stocks like telecoms and banks. He also thinks that in general, bonds will likely outperform stocks.

But though Arjuna Mahendran, MD and head of investment strategy at HSBC Private Bank is also bullish on telecoms, he is more cautious on the financial sector. He said to play it safe by sticking to defensive stocks.

(Watch interview at left)

"I would be cautious about the financial sector but certainly the defensives the telecoms, utilities, consumer goods staples, etc, are definitely looking very interesting right now," he said.

Mahendran also suggested that investors should have the key elements of their core portfolio in place because markets are expected to recover by the middle of next year. He differentiates the recovery of the credit and the equity markets, saying that in the near term, credit markets will likely recover earlier than equities.

Either way though, he sees both asset classes as good long-term investment opportunities.

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Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."