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Sunday, January 26, 2014

Horse Year set to 'giddy up and go'

Published on Jan 26, 2014

CLSA's fengshui report gives full rein to tongue-in-cheek tips but investors should not get carried away

By Goh Eng Yeow Senior Correspondent

The Snake year, slithering away before our eyes, was a game of snakes and ladders as some penny stocks enjoyed meteoric rises before tumbling ignominiously.

Saddle up, though, as the Year of the Wood Horse gallops in, promising investors "plenty of giddy up and go".

This is the tongue-in-cheek take on the lunar year ahead offered by foreign brokerage CLSA in its annual fengshui report.

Previous Horse years may have been old nags but this one looks like a thoroughbred, especially for certain market sectors, it says.

Though it focuses on the Hong Kong market, the wisecracks hit the mark in relation to other regional markets too.

Of course, there is no scientific basis for relying on the stars and other unworldly means to make predictions.

But CLSA believes that "the wood in the coming year will fuel, rather than feud with, the horse's intrinsic fire".

That should augur well for the year ahead, it has divined.

It is expecting the market in the new Chinese year to start with a big bang, even though widely-watched regional barometers such as the Hang Seng and Straits Times Index are languishing within tight trading ranges.

Last year, it was spot-on when it predicted that investors might make a dash for trash - a prescient foretelling of the mad craze for loss-making penny stocks - amid complacency carried over from the ebullient Dragon year.

So, even though the predictions should be taken with a pinch of salt, they might just turn out to be accurate again.

On how the market may fare each month, CLSA says: "If February isn't the month for business in a pimped pink stretch limo, we may as well call it it qi-its. It should be a filly-yer-boots."

It is also positive on May - the month when markets had been roiled for three years in a row. It notes: "The five phases' balance is near the year's best, with fire, one of the five elements, back in the game. In our view, it is as good as manna for the markets."

But the best is likely to be served last as January next year will turn out to be the best period for the Horse year. "On paper, at least, it crackles. The energies' balance is brill - easily the best all year, with the fire coming home strong and steady," it says.

But while CLSA waxes lyrical on the year's prospects, it also notes that previous Horse years had not been kind to the stock market.

In 2002, the Water Horse year, the Dow Jones Industrial Index plunged 28 per cent, as traders suffered a dreadful hangover from the wild dotcom party that had straddled the new millennium.

Before that, the Metal Horse year in 1990 was marked by Iraqi dictator Saddam Hussein's invasion of Kuwait, triggering the first Gulf War the following year.

Sector-wise, CLSA's fengshui report uses the elements to separate the likely outperformers from the possible laggards.

Stocks in the agricultural, soft commodities, forestry, paper and old media business will shine, as the wood in the Horse year enables businesses planted on solid ground to blossom.

Sectors linked to the fire element are likely to glow too, as fire causes the wood to crackle. This augurs well for stocks in the technology, Internet, telecoms and energy sectors.

But CLSA is bearish on counters in the property and construction sectors which are linked to the earth element that clashes badly with the wood element in the Horse year. "Timing is everything, but Earth's time isn't this time," it says.

This makes its dour forecast on the property sector similar to those made by analysts who use more conventional means such as rising interest rates fears and the slew of property cooling measures taken by Hong Kong and Singapore to explain their bearish stand.

And after slithering up strongly in the Snake year, the financial sector, which is associated with the metal element, "is more sink than sync and wealth looks more mown than grown", with CLSA predicting that it will muddle along this year.

For investors who believe that money-making prowess rests with their zodiac sign, CLSA says those born in the year of the Rat might want to "make like doormice", as their fortunes come into direct conflict with "Tai Shui", the evil star.

But take heart. It may not be straight from the horse's mouth at all but just a load of horse-talk. A big Gong Xi Fa Cai - striking it rich - for all investors in the year ahead.

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