The Year of the Ox bodes well for Hong Kong stocks, as the world’s third-largest equity market is expected to finish the lunar year higher, according to CLSA’s Feng Shui Index.
The Hang Seng Index will peak in August and end the year higher than where it starts, with pullbacks to occur in April and October, said Jamie Chan and Gabriel Ke, analysts at the investment bank who compiled the Chinese-styled astrological index.
As the Year of the Ox is related to water and metal, from a feng shui perspective, industries linked to the two out of the five natural elements, such as logistics, shipping and financial services, will do well, they said. The Year of the Ox starts on February 12, and coincides with the start of the spring festivities.
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CLSA’s Feng Shui Index, which takes a tongue-in-cheek look at the stock market based on the principles of feng shui, the ancient Chinese system of harmonising individuals with their surroundings, has been released every year since 1992. It surprised investors on its debut by correctly predicting the seven inflection points of the Hang Seng Index that year.
While CLSA says the feng shui guidance is for entertainment purposes only, the index is still seen by many investors as an important informal indicator of Hong Kong stocks.
Oxen are seen as diligent, hard-working and faithful animals in China. The last Year of the Ox in 2009 saw the Hang Seng Index surge 52 per cent as it recovered from the trauma of the global financial crisis.
“In 2009, the Ox led the recovery strongly,” said Ke at a virtual briefing on Wednesday. “We are hoping that the Ox can pull us out of the slump again.”
After stagnating in the doldrums in 2020, Hong Kong stocks started the new year strongly with a world-beating run that has been fuelled by unprecedented buying from mainland investors. The Hang Seng Index had risen 11 per cent this year through Monday, the best start to a year since 1985. The rally stumbled on Tuesday, with the benchmark tumbling 2.6 per cent for the steepest decline in eight months.
The Feng Shui Index was not too accurate about the performance of the Hang Seng gauge in the Year of the Rat. It had predicted that the benchmark would do well in the first quarter and rise to the highest level of the year in August before finishing the year slightly below the summer peak.
The Hang Seng Index actually tumbled by 16 per cent in the first quarter last year, as it joined the global stocks rout amid the outbreak of Covid-19 pandemic. It hit a bottom in March and trended up slowly for the rest of 2020, with gains accelerating since the start of 2021.
CLSA is a unit of Citic Securities. China’s biggest publicly traded brokerage by market value bought the French brokerage for US$1.25 billion in 2012.
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