If investors are hoping next year would be a smooth sailing one for the markets, they could be in for an unpleasant surprise.

Some of the top minds in investment and finance here are predicting that 2016 could see further volatility, with equities and bonds potentially seeing sluggish returns.

Chief investment officers (CIOs) of several big investment firms said last week that the answer to how markets could perform next year lies in two key questions.

One, will China be able to get a grip on falling growth rates? The other, said CIOs at a roundtable organised by the Investment Management Association of Singapore, is how an interest rate hike could impact economic fundamentals like inflation.

Growth in China is likely to come in just a shade under 7 per cent this year. Next year, some forecasters are tipping Chinese growth to slow to about 6 per cent, the weakest in 17 years.

But Lazard Asset Management managing director for Asian equities, Mr Manish Singhai, remained unconcerned. He said that part of the dislocation in China arises because it is trying to move away from the investment-led growth model.

"What we are seeing in China is a gradual but very meaningful move in the composition of the economy... Consumption has taken off in China. A lot of discretionary items have become staples there. Once you start using diapers, you can't go back to using cloth nappies," he said.

Mr John Doyle, chief investment officer, equities and multi-asset, at UOB Asset Management, said he sees opportunities in China but investors have to "be much more careful".

Another key event that could influence markets in 2016 is the interest rate hike, widely expected to be announced next week by the US Federal Reserve.

Most analysts expect next year's rate hike cycle to be shallow, given the potential backlash of strong dollar appreciation and a weak global economy on US growth and exports.

On this front, the experts believe that asset classes have already priced the rate hike in.

"Corporates that have exposed positions in terms of dollar borrowings have hedged out a lot of the risk. There may be surprises, but we are ready for it," Mr Doyle said.

One surprise is that the rate hike could actually be coming too late, with a surge in inflation something that few people are preparing for, said Ms Shirin Ismail, head of absolute return investment strategies, Fullerton Fund Management.

One region that could remain a bright spark is South-east Asia.

The Asean Economic Community will come into force next year and investment gurus are watching the region very closely. Asean will become a viable alternative over the next five to 10 years, especially as China's export competitiveness wanes, Mr Singhai noted.

Japanese and Chinese investors are recognising this opportunity and seem to be keen on investing in infrastructure projects around the region, he said.