Heat oil to 325° F. Lower fryer basket into oil. Dip prawns in batter, a few at a time, allowing excess to drip off. Drop half the prawns, one at a time, into fryer basket, keeping them separated. Deep-fry for 1 1/2 to 2 minutes, until light golden crust is formed. Remove and drain. Repeat with remaining prawns.Raise oil temperature to 365° F. Add all the prawns to the fryer basket and lower into hot oil. Deep-fry for 1 minute until golden brown and crust becomes crisp. Remove and drain.
Heat 2 tablespoons vegetable oil in a large wok over medium heat until hot. Add chile pods and stir-fry a few seconds until they turn a deep mahogany brown (do not blacken). Increase heat to high; add garlic and ginger and stir-fry a few seconds until fragrant. Add bell peppers and water chestnuts; stir-fry 20–30 seconds. Add chicken stock, soy sauce, vinegar, sugar and sherry; bring to a boil. Mix 1 1/2 tablespoons cornstarch with 1 1/2 tablespoons water and add to wok to make a light sauce. Add prawns, chili oil, peanuts, scallions and sesame oil. Toss well to coat prawns with sauce. Serve immediately.