PICK A FIGURE in the millions for the number of investors searching every day for that elusive modern Holy Grail, the leading indicator that will truly give them an edge over the competition on where share prices are headed next.
Here is a secret for you. There is indeed such a Holy Grail, the best leading indicator by far of coming financial and economic trends. Trouble is it is the wrong one. It is the stock market itself.
Now if only someone could figure out a way of making money by using stock market indices to predict money supply trends or likely changes in economic growth rates we could all be rich. How ironic that the best leading indicator of them all is actually the one to which people wish to be led.
We shall use it today in the reverse sense in which it works as an indicator of economic performance to see how well we have done in Hong Kong relative to the rest of Asia.
The first chart sets out the story. It shows the performance in US dollar terms of the Hang Seng Index relative to the weighted average of all stock markets in Asia outside of Japan. Start with a base of 100 in January 1990 and the latest figure is 551. In other words you would have done 5.5 times as well over that period putting all your money in the Hong Kong market as spreading it across Asian markets.
The curved line on the chart shows you your compound average rate of outperformance since 1991, 10.5 per cent annually and that would be 15 per cent if you took it back to beginning of 1990.