Lucky ‘red debut’ likely for Hong Kong market in Year of the Rooster

Analysts believe overall market sentiment is good enough to support a red debut, but they warn of challenges ahead

PUBLISHED : Saturday, 28 January, 2017, 11:00am
UPDATED : Sunday, 29 January, 2017, 10:44pm

The first trading day of Year of the the Rooster on Wednesday is likely to be a lucky “red debut” in Hong Kong, according to stockbrokers.

David Tung Wai, a veteran Hong Kong broker, believes there’s a strong chance for a red debut, in which the Hong Kong stock market would close higher on the first trading day of the Lunar New Year than it did on the last trading day of the Year of the Monkey on Friday.

“I have been trading in the stock market for more than 70 years. I have seen more red debuts in the Lunar New Year first day of trading than black debuts,” Tung said.

“I am confident the market will go higher as the overseas market sentiment is good. The Dow Jones in the US closed above 20,000 for the first time in history on Wednesday,” he said.

Tung said a red debut is seen as a good omen while a black debut, which means the market closes lower, would be a bad omen.

“Overall, I believe the market would be more positive in the year ahead,” Tung said.

The benchmark Hang Seng Index closed on Friday at 23,360, down 0.06 per cent on what was the last trading day of the Year of the Monkey.

Ben Kwong Man-bun, a director of stockbroker KGI Asia, said the market is likely to see a red debut in the Year of the Rooster.

“The investment sentiment in recent weeks has been pretty positive as the US stock markets have been doing well, while new US president Donald Trump has not [yet] made any negative policies against China. The yuan has also turned stable against the US dollar in the past two weeks,” Kwong said.

“Under these circumstances I believe there is a high chance we will see a red debut on Wednesday,” Kwong said.

Christopher Cheung Wah-fung, the lawmaker for Hong Kong’s financial services sector – who is also a veteran stockbroker – also expects the first trading day of the Year of the Rooster will be a lucky red debut.

“Global market sentiment is strong as the US new president Donald Trump has not yet announced any harsh trade policies against China. Also, the mainland Chinese economic data released recently has been stable,” Cheung said.

“In addition, Beijing recently announced that provincial governments can carry out some reforms of local state own enterprises without the need to first get a green light from the central government. This will speed up the reform process and boost economic growth. This is positive news to the stock market,” Cheung said.

However, Louis Tse Ming-kwong, a director of VC Brokerage, said that even if the first trading day of the new Lunar year closed higher, investors would need to be prepared for a more bumpy road in the year ahead.

“Britain will start to negotiate Brexit starting from March, and how it will leave the European Union. There will be presidential elections in many European countries this year including Germany, France and others. There may also be a trade war between the US and China under new president Donald Trump’s policies,” Tse said.

“It is likely to be a bumpy road ahead during the Year of the Rooster,” Tse said.

Jasper Lo, chief strategist for King International Futures, said the yuan may face attacks by overseas investors during the Lunar New Year holiday.

“While China’s investment markets remain closed this week for the Lunar New Year holiday, many western investors may take this as an opportunity to speculate on the yuan and also on some Chinese companies listed overseas. This may mean the first trading day of the [Lunar New Year] in Hong Kong on Wednesday and the mainland markets on Friday may be volatile,” Lo said.

Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia will participate in a ceremony on Wednesday to welcome back brokers when the stock market reopens after the Lunar New Year holiday break.

Mainland China markets in Shanghai and Shenzhen remain closed for holiday and will reopen on Friday, February 3.