Feng shui tips for Hong Kong stocks: strong returns for property, transport, renewables and gaming

The Hang Seng Index could peak in July after a flattish start and then pull back modestly, but could still end the year higher, says CLSA

PUBLISHED : Thursday, 19 January, 2017, 7:03am
UPDATED : Thursday, 19 January, 2017, 4:17pm

The Year of the Rooster, which starts on January 28, could bring positive returns for the Hang Seng Index and see a particular strength in the property, transport, renewable energy and gaming sectors, as well as China plays, according to Wednesday’s feng shui tips by Hong Kong-based brokerage firm CLSA.

It’s CLSA 23rd Feng Shui Index, a tongue-in-cheek play on the influences of the Chinese zodiac on Hong Kong stocks.

Feng shui is popular in east Asia, as many people seek feng shui masters for advice on issues ranging from health and family, to career and wealth.

In Hong Kong, CLSA’s Feng Shui Index is regarded by many investors as one of the two most important informal indicators of Hong Kong stocks.

The other indicator is the “Ting Hai effect”, a strange stock market phenomenon that the Hang Seng Index often sells off when a movie or television show starring Hong Kong actor Adam Cheng is aired.

The effect was named after Cheng’s character in a 1992 television drama where he played the primary antagonist who shorted Hong Kong stocks.

“The past year of the Fire Monkey was mischievous , but the coming year of Fire Rooster could bring positive returns for the Hang Seng Index,” said Cherry Ma, senior investment analyst at CLSA, which was bought by Citic Securities from France’s Crédit Agricole SA in 2012.

The Hang Seng Index was launched in 1969, a year of the Earth Rooster in fengshui.

The past year of the Fire Monkey was mischievous , but the coming year of Fire Rooster could bring positive returns for the Hang Seng Index...The monkey is unpredictable, while the rooster is nimble, humble, and hardworking
Cherry Ma, senior investment analyst, CLSA

“The monkey is unpredictable, while the rooster is nimble, humble, and hardworking,” she added.

She said the HSI could have a flattish start and then rise to the peak of the year in July. It would fluctuate through September but remain at high levels in the third quarter.

In the final two months, the index could pull back modestly, and end the year higher, Ma said.

Although CLSA says the fengshui guidance was for “entertainment purpose”, the index shocked the market and gained popularity after its 1992 debut, when it predicted exactly the 7 key turning points of the Hang Seng Index (HSI) that year.

Nonetheless, in the past 20+ years, its accuracy has been regarded as below average.

“Feng shui is always changing. No one can ever predict 100 per cent right. We were at least 50 per cent accurate in last year’s trend forecasts,” said Ma.

Last year, the Feng Shui Index projected the Hang Seng to have a good start and then pull back, but predicted it could rebound in the second half and have a modest rise.

However, the HSI touched its bottom of the year in February and fluctuated in the first half. It gained momentum in the third quarter and closed the year slightly higher by 0.4 per cent.

“Still, we were pretty accurate in predicting the trend in the second half and picked June 24 as a day for bad monkey business,” Ma said, noting that was the day after Brexit vote, when the HSI closed down 3 per cent.

Top sector picks this year are earth and water-related industries, including transport, gaming, resources, renewables, property, and China plays, said Jeffrey Tong, senior research associate for CLSA.

The classical five feng shui elements are wood, earth, metal, fire and water.

Tong said throughout the Rooster year, the fire and metal elements will take the lead in influence, but earth, wood, and water will also play their roles in turn.

From May through to July, gaming and transport stocks, which are related to the water element, will be strong. Starting the mid-year, fire-related oil and gas, utilities, tech and telecommunications will shine. Then earth-related industries could flourish after the summer, including property, renewables, resources and China plays. In November and December, water will come back, with transport and gaming sectors back in favour.

“In general, our Rooster index predicts fiery returns for gaming, transport and renewables for the overall year,” he said.

Whe it comes to Hong Kong property market, Ma and Tong suggest investors “go north”, with areas in Sha Tin and Fan ling more favourable, while they advised investors to avoid Repulse Bay and Shek O.