Hong Kong stock market in for a topsy-turvy ride in Year of the Dragon: CLSA

Hong Kong stock market in for a topsy-turvy ride in Year of the Dragon: CLSA

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Hong Kong stock market investors can expect a roller coaster ride full of turbulence and drama, symbolized by the Chinese dragon zodiac, according to CLSA’s tongue-in-cheek Feng Shui Index.

Market weakness will endure in the first half of the Year of the Dragon, with the Hang Seng Index likely to reach 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 look into our crystal ball tells us that the dragon has become tangled in the rabbit’s long 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 often dramatic characteristics of a dragon year.”

The Hang Seng Index lost 9.2 percent in January, the worst start since 2016, when the gauge fell 10 percent. Weak economic data, gradual support measures from Beijing and renewed geopolitical risks have weighed on sentiment, and foreign investors continue to dump Chinese stocks.

CLSA analysts Justin Chan and Stella Liu will release the brokerage’s annual Feng Shui Index on Thursday. Photo: Brochure

CLSA analysts said Hong Kong stocks could fall significantly between February and March before recovering as a “dumb dragon emerges from its cave.”

“Unable to read the signs left by the rabbit, [the dragon] “It will fall down the hill, bringing with it a lot of dust and rocks,” the analysts said, referring to the current Year of the Rabbit, which ends on February 9.

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How will your Chinese zodiac fare in the Year of the Dragon?

How will your Chinese zodiac fare in the Year of the Dragon?

The Hang Seng Index will soar in August to be “clearly above the level it started at” and will record its best month in November as the dragon looks to achieve its target before the end of the year, they added.

In the Year of the Dragon, fire will replace earth as the governing element for the next two decades, supporting advances in fields such as technology, medicine and chemistry. Meanwhile, earth-related industries such as livestock farming could also continue to do well, as fire produces earth according to the Chinese philosophy of the five elements.

However, the metals sector could encounter difficulties. Timber-related businesses should remain stable or even see growth, they said.

Launched in 1992 as a Lunar New Year card, the CLSA Feng Shui Index is a joyous outlook for the Hong Kong market based on the interplay of “bazi” or four pillars of destiny., a Chinese astrological concept that predicts the future.

The guide is not a research report and investors should make decisions based on fundamental analysis, the company said.

“Our attempt to decipher the dragon’s path is akin to peering through a hole once a month to glimpse its elusive movements,” they said. “True to the nature of the dragon, these predictions may show a bias opposite to what we have indicated, or offer no direction at all.”

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