Hong Kong-based hedge fund Central Asset Investments, which runs the CAI Global Fund, is back to posting stellar performance figures and is well up on its high water mark.

The fund was up 77% last year and rose by 113% in 2007 with no down months. Performance in 2008 wasn't so strong, but the fund regained its high water mark in October 2009 and now stands about 12% above that level. Eddie Tam is chief executive and chief investment officer of CAI -- which in Chinese, appropriately, means 'wealth' -- and is flanked by fellow principals Armand Yeung and Vishal Tourani.

CAI took advantage of market dislocations, particularly on the credit side. "We had a lot of conviction in our portfolio. We sold out early from equities, but made the mistake of shifting too early into credit," says Tam. "In the end, Asian credit held up really well -- there were hardly any defaults."

"Both credit and equities did well in 2009 for us," he adds. "Greater China, Hong Kong and India especially in credit, and equities mainly in Hong Kong. We made good money investing in high-speed rail. I still like trains."

January markets were up and down, and he says that portends more challenging times.

In the equity space, CAI still believes in the same things, such as consumption plays in China, especially at the luxury high end. "That sector is not only resilient, but growing rapidly and includes automobiles, jewellery and watches," says Tam. "You'd think some of those niche plays would command a higher premium, but actually they don't. Some Hong Kong plays are still dirt-cheap and even after the rebounds are still trading at single-digit price-to-earnings ratios and high dividend yields."

In China, he views 16-17 times P/E ratios as not expensive, especially when compared to the historical average.

"People often compare China today to Japan in the eighties, but actually a better comparison is with Japan in the sixties or seventies in terms of GDP per capita and infrastructure development," says Tam. "More broadly, I think China has been more pre-emptive and effective with its stimulus package than other countries."

"In terms of speed and size, [China was] probably the most adept in its policy co-ordination," he adds. "Now [it's] leading the way with stimulus withdrawal and bursting any bubbles by [itself]."