If CLSA's feng shui masters are worth their salt, punters in stock-crazy Hong Kong may have cause to celebrate just as the year of the horse approaches.
The predictions for CLSA's feng shui index -- a tongue-in-cheek financial forecast for the upcoming year -- were doled out by silk-clad CLSA analysts at a briefing held at the China Club on Wednesday.
In the year of the "wood horse" -- which starts on January 31 -- the Hang Seng Index is expected to charge ahead, a bit like Robert de Niro in the film Raging Bull where he played the boxer Jake LaMotta, a former world middleweight champion with a relentlessly aggressive fighting style.
The CLSA feng shui masters predict a lot of fire, which bodes well for stock markets. Their optimistic forecast is that the Hang Seng Index could reach as high as 28,105, with a fast-paced rally in the first half of the year. That compares with Wednesday's close of 23,082.
But before investors start punting their hard-earned money away on shares, it is worth noting that the past five horse years have been a mixed bag. So it's no sure-win. There were only two champion horse years for equities: 1954, when the Dow soared 40%, and 1978, when the Hang Seng was up 35%. In 2002, in contrast, the Hang Seng sank 13%.
Which sectors should investors focus on? For starters, sectors related to the wood element, which includes retail, traditional media, soft commodities and plantations, followed by fire, which includes internet, tech, telecoms and entertainment.
However, sectors related to the earth element such as building materials, construction and property should be avoided, CLSA's masters say.
Hong Kong property investors could be for a rough ride in the year of the horse. Aside from rising interest rates, investors will have to reckon with adverse feng shui factors. Previous horse years have seen disastrous performances, particularly in 1894 (also a wood horse year), when a bubonic plague spread rapidly in Hong Kong, causing 2,500 people to die that year alone.
Thankfully, the feng shui masters aren't predicting anything as dire in the approaching year. Jackson Hui, research associate at CLSA, predicts that Hong Kong property prices will fall by 15% in the next 24 months, a view that is backed by both empirical research and careful scrutiny of the tea leaves.
“For property prices, apart from the feng shui and just purely from the research, for 2014, we are expecting property prices to drop 10% and another 5% next year,” said Hui.
Interestingly, the masters also have predictions on individuals. For Alibaba’s founder and chairman Jack Ma, the masters would be happy to report a wildly successful IPO in Hong Kong, with CLSA as a lead bookrunner of course (in a bit of unabashed self-marketing), but instead, see a "sea of troubles" for Ma, though they add there couldn't be a better man at the helm.
They also note that the charts for Janet Yellen, the chair-apparent of the US Federal Reserve, "inspire confidence" but caution that it won't be a walk in the park for her, with September threatening to "seriously stress-test" Yellen's mettle and cool. Yellen, take note.
When asked by some skeptics in the room about the accuracy of CLSA's feng shui predictions last year, CLSA investment analyst Mariana Kou said that in some years they have done “really well” and conceded that in some years they have been "slightly off." But neither did they appear too concerned.
Loosely translated: Invest at your own risk.
The CLSA Feng Shui Index started as a Chinese new year card for CLSA's clients in 1992, with a summary of forecasts by a group of feng shui masters and a few of its own views. This year marks the 20th edition.
