Year of the Dragon: Hong Kong stock market in for a topsy-turvy ride, CLSA’s Feng Shui Index predicts
- The Hang Seng Index could fall between February and March before making a recovery in the summer, CLSA analysts Justin Chan and Stella Liu say
- With fire replacing earth as the guiding element, breakthroughs in fields such technology, medicine and chemistry can be expected, the brokerage predicts
Hong Kong’s stock market investors can expect a roller-coaster ride full of turbulence and drama as symbolised by the Chinese zodiac of the dragon, according to CLSA’s tongue-in-cheek Feng Shui Index.
Market weakness will endure in the first half of the Year of the Dragon, and chances are the Hang Seng Index will climb into positive territory only in the summer or later, analysts Justin Chan and Stella Liu said in a report on Thursday. The market could possibly end the year higher, they added.
“A gaze into our crystal ball tells us that the dragon has become entangled in the cottontail rabbit’s elongated tail, signifying general weakness in the market in the first half of the year” they wrote. “The busy nature of the zodiac animals reflects the frequently dramatic characteristics of a dragon year.”
The Hang Seng Index has lost 9.2 per cent in January, the worst start since 2016 when the gauge tumbled 10 per cent. Weak economic data, Beijing’s piecemeal support measures, and renewed geopolitical risks have all weighed on sentiment, with foreign investors continuing to dump Chinese stocks.
The CLSA analysts said that Hong Kong stocks could fall significantly between February and March before making a recovery as a “groggy dragon stumbles out of its cave”.
“Unable to read the signposts left by the rabbit, [the dragon] will tumble down the hill, bringing a lot of dust and rocks with it,” the analysts said, referring to the ongoing Year of the Rabbit, which ends on February 9.