In the days of yore people used dartboards as a fun way to predict the financial markets. Then along came CLSA with its Feng Shui Index and an even more bizarre way to predict the year ahead was born. And as tradition has it, the Feng Shui masters at CLSA produce their index and predictions just before Chinese New Year. So as the Goat departs, and the year of the Monkey arrives, what will be in store for local capital markets?
First off, a reminder of last year's predictions. CLSA's Feng Shui masters stated that 2003 would be an inflexion year, and would end five years of bad luck. As it turned out this was spot on, with markets across Asia suffering from SARS in the early part of the year - with SARS possibly being the inflexion point - before Asia made a staggering bounce back.
This year the Feng Shui Master predicts more luck and the beginning of a multi-year bullmarket. Its index of good versus bad feng shui shows that the second half of the year will soar versus a more troubling time in the first. This goes against the grain of conventional predictions which see the opposite being true.
Among its other predictions are a gold price of $500/oz, Bush to win the presidency and for Cheung Kong Group to return to the limelight - while Hong Kong's residential property market starts to boom again (up 25%). Feng Shui dicates you should buy Bank of East Asia, New World Development, and Sino Land. Sectorwise the Feng Shui team advocates tech, telcos, power and financials.
In the three previous years of the Monkey CLSA points out that the Hang Seng Index has performed well. In 1968-69 it was up 70.2%, in 1980-81 up 77.7% and in 1992-93 up 23.8%.
On the downside Monkey years sometimes come with trouble. In 1908 an earthquake killed 150,000 in Italy, in 1932 there was a famine in the USSR, in 1956 Egypt took the Suez Canal, in 1968 Russia invaded Czechoslovakia and in 1980 the Iran-Iraq war began.
Noneof the above (notably) happened in Asia, which suggest the Monkey may be more benign for the region than for everywhere else.
In a more serious prediction, CLSA's chief economist, Jim Walker is predicting that inflation will return in Hong Kong and that real GDP will grow 8.4% in 2003 (or 10% on a nominal basis).
