Year of Rooster is no featherweight
By Darren Boey Bloomberg News Thursday, February 3, 2005
Stock analysts and geomancers forecast 'superior growth'
HONG KONG Chinese communities from Singapore to San Francisco next week welcome the Year of the Rooster, which astrologers say will deliver stability and growth to financial markets. Investors like JF Asset Management agree.
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"It's something to crow about" should be the motto of the year, said Geoff Lewis, the Hong Kong-based head of investment services at JF Asset, which holds $57 billion of mostly Asian assets.
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"Asia will be in favor with investors this year because there's still superior growth," he said.
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Predictions for a prosperous Year of the Rooster are backed by China's growth. The economy expanded 9.5 percent in 2004 from the previous year, more than some analysts had expected. Imports from China's trading partners climbed 36 percent.
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In Hong Kong, which is home to Asia's second-largest stock market, Lunar New Year stock predictions are closely watched.
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CLSA hands out an annual prognostication for the New Year based on a mix of fundamental research and the advice of feng shui consultants.
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CLSA, voted the best brokerage firm of 2004 in an Asiamoney poll of investors, says that markets will "take a breather" in the first half of the new year, before a second-half rally that will take most "up to multiyear highs."
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"Prepare for a rough ride in the first half," Chris Zee, a CLSA analyst, told reporters as the firm released its latest report Tuesday.
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He and Amar Gill, the broker's chief Hong Kong economist, presented their forecasts clad in traditional yellow embroidered silk jackets.
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In the Year of the Rooster - which starts Feb. 9 with up to a week of holidays in Hong Kong and China - CLSA recommends that investors favor shares of textile, manufacturing, commodities, banking and property companies based in China.
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While the broker did not name stocks or provide specific estimates for gains, Gill said that the Hang Seng index in Hong Kong, which closed at 13,555.80 on Wednesday, could reach 15,850.
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Last year, the Year of the Monkey, CLSA called the trend, predicting that the Hang Seng would decline in the first half before "soaring" in the second. The index has rallied 24 percent since closing at its 2004 low on May 17. The Morgan Stanley Capital International Asia Pacific index climbed 9 percent.
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Granted, the astrological predictions are backed by more fundamental indicators in Hong Kong. The economy grew more than 7 percent last year, its fastest pace in four years.
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That has helped fuel property demand. Property sales climbed 86 percent last year from 2003 as prices surged, according to Land Registry figures. CLSA predicts property prices will climb another 25 percent in the Year of the Rooster.
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That may mean more gains for property shares such as Sun Hung Kai Properties. Property stocks were the second-best performing industry group on the Hang Seng index in 2004 and Edwin Ma, a Hong Kong-based geomancer, is recommending them.
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"This year will be very, very stable" for stock markets, said Ma, who has more than a thousand clients in Asia and has been practicing his art for more than 10 years. China's economy is likely to grow at an 11 percent clip this year, which will benefit Hong Kong's economy, Ma said in an interview.
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Whether or not investors believe in the geomancers' predictions of economic growth in Asia this year, some fund managers like JF Asset are certainly betting on shares of companies linked to economic growth in the region.
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JF Asset likes telecommunications companies and airlines in China, Lewis said. James Cheng, who oversees $13.6 billion as chief investment officer at Invesco Asia, favors retailers and property shares in the region.
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He estimates that economic growth in Asia outside Japan may slow to 5.8 percent this year, from 6.8 percent in 2004.
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"Local consumption will start to pick up the slack of slowing exports," said Cheng, who is based in Hong Kong. "Fundamentals in Asia are pretty good." He declined to name specific stocks.
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Other investors, like Rajeev Gupta at Basis Capital in Sydney, remain more circumspect, both about prospects for growth in the region and about following astrological predictions. If nothing else, these forecasts present investors with different ideas, Gupta says.
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"You pay some credence to them," said Gupta, who helps manage $300 million as director of Asia-Pacific equities at Basis Capital. "Does it make me change my thinking? Not really."
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Gupta likes shares of Inventec, the Taiwan company that is the world's third-largest maker of notebook computers.
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Lewis at JF Asset is "optimistic" for the Year of the Rooster. Growth in Asia will still be strong enough to bolster consumption and corporate earnings, he said. The positive view is echoed by Zee at CLSA.
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"As we say goodbye to the cheerful Monkey, let the crowing Rooster guide us to a fruitful New Year," he said.
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