It's snakes and ladders on CLSA's Fung Shui Index
Fung Shui Index points to fluctuations in the year ahead, but the beast will perform better than in previous cycles, says the brokerage
The snake has never been a lucky icon for the Hang Seng Index, with the gauge never managing to finish higher in the past three snake years. But as the beast uncoils in 2013, CLSA said in its annual astrological prediction that this year it could be different.
The beast could behave better than it previously did, helping the local benchmark finish at a higher level in this traditional Chinese year, which ends in January 2014, according to CLSA's Fung Shui Index.
The Hang Seng was likely to continue climbing to an intrayear high in August on the back of a strong performance in the resources sector, the broker said. Afterwards, it would slump and fluctuate between losses and gains before bouncing back to positive territory in January.
"We see a resources-led slow burn run-up for the HSI from 2Q. As it builds, risk flicks 'on'. But August looks to be double trouble in terms of malevolent energies from the year's flying start. For the rest of the year, the HSI has the look of a cat on a nine-life death bounce," the report said.
The positive performance is due to elements that will help tame the negative energy of the snake, according to CLSA. Mariana Kou, the broker's consumer and gaming analyst, and Emily Lam, a member of the institutional sales team, led the prediction this year.
The lucky element visible for the Hang Seng is "fire", which represents "wealth", the report said. Meanwhile, the nine flying-starts, which usually represent something big and ugly, all return to their home sectors and provide a more stable outlook for the equity market.
As for individual sectors, the snake will be most negative for industries that belong to the "fire" element, such as the oil and gas sector, and "wood", such as property developers and infrastructure sectors, the report said.
Those sectors traditionally associated with "metal", such as brokers and financials, and "water", such as gaming and logistics, will outperform. Based on energy, any activity can be classified into wu xing, or elemental terms: wood, fire, earth, metal and water.
Finance is the most favoured sector this month and in January next year, while the resources sector will outperform in June and July.
The retail sector is the most favoured in October and December, as the market sinks into negative territory, according to CLSA.
As befits "skin-shedders", snake years are marked by major transformation and change - and sometimes great upheaval, such as the Depression in 1929. In the past three snake years, the Hang Seng lost 6 per cent, 12 per cent and 34 per cent, respectively.
"The past is a foreign country," the report said. "They do things differently there."