China stars as markets weather credit crisis

At the same time, oil, gold and most other commodities were boosted by political fears and continuing heavy demand from developing countries.

China was again the star performer with the main Shanghai index virtually doubling in value over the year. But the ride was not always smooth for investors. The index plunged 9% in February, holding the rest of the world's markets in limbo for a time.

Demand was fuelled by a record number of new share offerings on the Chinese markets. But analysts fear a correction in 2008 with Chinese inflation soaring and demand for its exports set to fall as the US economy slows.

The country's stock markets remain relatively illiquid, with limits placed on foreign investors and the bulk of new issues still state-controlled companies.

Hong Kong remains the favoured market for exposure to the Chinese boom, and the Hang Seng index ended the year 39% higher, making it Asia's fifth best-performing market. It hit its peak in October but has slid since on the effects of the subprime crisis and delays for plans to let mainland Chinese investors buy Hong Kong shares directly.

Indian shares have pretty much ignored events in neighbouring Pakistan, and the Bombay Sensex 30 ended the year 47% higher while its larger rival National Stock Exchange Nifty index gained 55%. The increasing affluence of India's growing middle class is pushing demand for consumer goods and for home-grown financial products.

Oil prices threatened to break through $100 a barrel in November. Even now, with signals that US demand remains high and stocks low plus fears of interrupted supplies from the Middle East, crude is trading near record levels. US light sweet crude rose 11 cents overnight to $96.11 while Brentwas 27 cents higher at $94.15. Its record level was $95.76 in October.

Precious metals ended the year at or near record highs, spurred on by fears about the situation in Pakistan.

Gold has risen by 30% this year - its biggest gain since 1979. It was today trading at $842.40 an ounce on the spot market, with analysts forecasting that it could break through $850. The last time it was at that level was 1980. To put that in context, the equivalent value adjusted for 27 years of inflation would be $2079 an ounce.

The developed markets fared less well, given their more direct exposure to the US subprime crisis. The Dow Jones Average ended the year a modest 7.2% ahead while the more broadly based S&P 500 was up just 4.2%. In the UK, the FTSE 100 index was headed for an annual gain of 4.1% although it was today down 15.2 at 6461.7.

The year's advance is below virtually everyone's predictions at the start of the year. Morgan Stanley and Brewin Dolphin had both forecast 6550 for the year-end while Barclays Wealth had been looking for 6800 and Hargreaves Lansdown for a heady 7000.