Marinate water chestnuts in soy sauce for 30 minutes. Roll each chestnut in sugar, then wrap with a strip of bacon and secure with a cocktail pick. Arrange on cake rack in a shallow pan.
Bake in hot 400 degree oven for 20 minutes. Drain on paper towels. Before serving, return to moderate 350 degree oven for about 5 minutes to reheat and crisp up the chestnuts. May be served immediately. Makes about 16 appetizers.