Opinion | Close your eyes to the Adam Cheng effect at your peril
Superstition plays a special role in Hong Kong investing. All it takes to anticipate stock market swings is to know what others believe is true
Should investors be quaking in their boots in anticipation of the release of a new movie starring Adam Cheng Siu-chow? According to an article in this newspaper on March 30, the answer is yes. The Post reported that the actor is unwittingly responsible for what has become known as the "Ting Hai effect" that followed the 1992 release of TVB drama series The Greed of Man, in which Cheng played the role of Ting Hai, a derivatives trader who makes a killing shorting a bull market. And sure enough, while the series was screening, the Hang Seng Index dropped by as much as 13 per cent.
Five years later, Cheng was back in another television series whose run coincided with another plunge in the market. In 1998 he was at it again, with a series that coincided with the Asian financial crisis, and then again in 2000, when the hi-tech stock bubble burst.
So stock market wags are wondering whether the new series will have the same effect or whether it might just be an excuse for a market plunge. Superstition is no stranger to people's thinking in Hong Kong, and so an explanation for stock market movements based on seemingly illogical beliefs, folklore or whatever is not quite as absurd as it may sound.
Indeed there is no need to confine this theory to the Hong Kong market, as superstitions and folklore looms large in markets across the world.
My two favourite American examples are the so-called Super Bowl and hemline effects on stock market performance. The former holds that if the National Football Conference wins, the stock market will rise, and that if the American Football Conference prevails, it will fall. The hemline theory holds that as hemlines rise, so do stock prices, and that the reverse happens when they fall.
How does this stack up against the historical evidence? Well, stocks boomed in the 1920s, when the short flapper funk was in vogue, and they famously crashed when hemlines fell. Prices remained in the doldrums until the 1950s, when high poodle skirts made an appearance, and so on.