Hong Kong stock market likely to head lower on first trading day of Year of the Monkey

First trading day of the Lunar New Year on Thursday more likely to see a ‘black debut’ than a lucky ‘red debut’, Hong Kong brokers say

PUBLISHED : Tuesday, 09 February, 2016, 4:35pm
UPDATED : Tuesday, 09 February, 2016, 4:35pm

The first trading day of the Year of Monkey on Thursday February 11 will have a higher chance of seeing a “black debut” instead of a lucky “red debut”, Hong Kong brokers say.

It would be a good omen to see a red debut – meaning the Hong Kong market would close higher on the first trading day of the Year of the Monkey than the last trading day of the Year of Goat (Friday February 5).

A black debut, which means the market would close lower on the opening day than the close last

Friday, would be a bad omen.

David Tung Wai, who at 87 is the oldest of his broker peers and has been trading in the stock market for over 70 years in Shanghai and Hong Kong, said he has witnessed more red debuts than black debuts in his career but he believes we are likely to see a black debut in the Year of Monkey.

“It is likely we are going to have a black debut in the Year of the Monkey as the oil price has kept falling, US stock markets have been falling, while there are many short sellers shorting both the Hong Kong dollar and stocks,” Tung said.

“Under the weak economic outlook and poor investment sentiment, it would be hard to see a red debut. However, I believe the market would have support for the Hang Seng Index to reach the level of 18,000.”

Jun Yang Securities Chief Executive Kenny Tang Sing-hing said he believes the Hong Kong stock market will fall when it opens on Thursday – but whether or not there will be a plunge will depend on the performance of US and European markets in the coming two days.

Tokyo stocks closed down 918.86 points or 5.4 per cent on Tuesday as US and European equities sank overnight, fueling concerns about the global economic outlook.

Choi Chan Po-sum, permanent honorary chairman of the Institute of Securities Dealers, who has been a broker since 1970, said there were usually red debut in the 1970s and 1980s.

Under the weak economic outlook and poor investment sentiment, it would be hard to see a red debut
David Tung Wai, long-time broker

“Back then, the stock market was mainly traded by Hong Kong-based brokers who liked to see a red debut as a good omen for the year. As such, most people would not sell, but buy in the market on the first trading day of the Lunar New Year,” she said.

“However, since the mid 1990s the Hong Kong stock market has been traded more and more by international investors who do not celebrate Lunar New Year and they will sell stocks whenever they see fit. We have thus seen more black debuts for the new year in recent years. This year is likely to see a higher chance of a black debut than a red debut as the sentiment is not good,” she said. However, she believes the stock market would bounce back later this year.

Louis Tse Ming-kwong, a director of VC Brokerage, said the first trading day of the Year of Monkey is likely to see a higher opening given that stocks have been falling to a level already seen as cheap.

The stock market dropped 10 per cent in January and has fallen 30 per cent from its peak level at over the 28,000 in April last year when a rally pushed the market to a seven-year high, before the downward spiral began in June.

“The Hong Kong stock market has been trading at a PE ratio of about 9 which has been very cheap and should attract some long-term investors to buy into the market. After the Lunar New Year holiday investors are more likely to buy than to sell,” Tse said. “However, I am not sure if the buying orders could sustain until the end of the trading day on Thursday [to result in a red debut],” he added.

The last trading of the Year of the Goat closed up 0.55 per cent to 19,288.17 on Friday.

Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia will participate in a ceremony on Thursday to welcome brokers when the market reopens.

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