Hong Kong investors’ tails will be wagging in Year of the Dog as feng shui predicts solid year for Hang Seng Index

The annual CLSA ‘Feng Shui Index’ sees gains in pharmaceutical and consumer stocks but not for banks, and warns property investors to mind their flying stars

PUBLISHED : Monday, 05 February, 2018, 6:16pm
UPDATED : Monday, 05 February, 2018, 11:35pm

Investors in the Hong Kong stock market will have their tails up in the Year of the Dog, with the Hang Seng Index set for solid gains and pharmaceutical and consumers stocks a good bet, according to the annual “Feng Shui Index” compiled by Hong Kong-based broker CLSA.

The index, produced every year since 1992, takes a tongue-in-cheek look at the stock market based on the principles of feng shui, an ancient Chinese system of harmonising individuals with their surroundings. The index is regarded by many investors as an important informal indicator of Hong Kong stocks.

The coming year is the year of the earth dog, which represents duty, loyalty, defence and protection. This means investors should not be aggressive but prudent when making their investment decisions. Those born under the zodiac signs for the dog, rabbit and monkey will have a lucky year, but roosters, goats and dragons might have a rocky path.

“The enthusiastic earth dog jumps out of the kennel, tossing the fire rooster back to the barn and sending the Hang Seng Index skyward,” CLSA said.

The Hang Seng Index could have a great start, before pulling back in March. Through to the summer, the market “chases its tail and drops”, CLSA analysts said. In the second half, however, the index will have steady gains, before closing on a high at the end of the year. The Year of the Dog begins on February 16 this year.

From a feng shui perspective, sectors such as pharmaceuticals and consumer industries will be best performers in the upcoming year, as “the earth dog sees strong gains in wood-related industries overall”, the analysts said.

Telecommunications, internet, technology, and utilities could also perform well because they are classified under the element of fire, as they are modern types of energy.

But water-related sectors such as casinos and transport “won’t get a leg up” until October. There is also a lack of metal element this year, so banking, financials, autos and machinery are expected to underperform this year after strong performances in the past two years.

“Investors who expect decent returns from banking and financials are definitely barking up the wrong tree this year,” CLSA said.

In 2017 the Hang Seng Index was one of the best performers worldwide, jumping 36 per cent, or 7,919 points – the biggest point gains on record, but how accurate was the Feng Shui Index ‘s prediction?

It got the part right about the index ending the year higher, but had it wrong in saying the index would peak in July and pull back briefly.

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

The year before, it had predicted a strong start followed by a pull back and then a recovery in the second half, while in actuality the Hang Seng started poorly and did not pick up until the third quarter.

CLSA has always maintained that index is just for entertainment, but it gained traction in its 1992 debut, when it correctly predicted the seven key turning points of the Hang Seng Index that year.

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

For property investors, meanwhile, the index sounded a note of caution: they would do well to consult the feng shui charts before making any decisions to buy, as “the flying stars bring their attributes to bear on the nine areas of Hong Kong they inhabit”.

In one of the disciplines of feng shui, flying stars can be timely or untimely, with consequences to match.