Rabbit year forecast

Renowned Feng Shui Master Lee Shing-chak presented to a full house at our annual CLSA 2011 Feng Shui Luncheon in Hong Kong. He views the rabbit as reserve, attentive, conservative, and excitable. The stock market will be range bound with little opportunities to make large profits. The big risks this year could be bird flu, North Korean conflict and earthquake. Gold will do well, but property will not. Market will improve in 2012 leading to a continue rally until recession in 2014-15. He likes entertainment, gaming, transports and tourism sector. Avoid property and construction. Stocks with the luckiest numbers are Yanzhou (1171 HK), NWD (17 HK), Cheung Kong (1 HK) and Tencent (700 HK).

What to watch out for?
The major events to watch out run the full range with disease, economic malaise and war which reflect the Korean War period sixty years ago.

• H5N1 – We could see another out-break of the bird flu as this is a bad year for the rooster. Rabbits use their ears while roosters use their mouth, so the two animals naturally conflict leading to health problems and injuries related to roosters such as H5N1.
• Earthquake – East is a bad direction this year which could cause natural disasters such as earthquake. The earthquake is likely to be in the east which would mean problems for Taiwan or Japan.
• War – The North Korean conflict could escalate similar to the Korean War 60 years ago.
• Inflation – QE2 is causing inflation and a potential Korean conflict will add to the pressure. Gold and agricultural prices will go up the most.

What to buy? Markets, sectors, home prices, and gold
This will be a bouncy year for the market with no large rally or money making opportunities. Market will be weak in 1H, bottoming between May and August and should rally there-after. The best element this year is water which means movement. Thus, transport, logistic, and tourism sector will do well. The western direction is auspicious which means that entertainment including Macau gaming should also do well. He is also positive on gold which will go up to USD 1,600 - 1,800 oz by the end of the year. The best entry point would be mid-year. This is the year of metal which means that it is bad for the wood element. Property and construction will not do well.

Hong Kong property policies will follow Beijing and hence will cap property price. Property price will fall until mid-year and then rebound. Luxury will do better than mass market due to potential new policy. The best area in Hong Kong is Tai Koo Shing. Aberdeen could become a luxury market.

This is a good year for the dog sign as dogs always chase and out-runs the rabbit. People who are born in the year of the Monkey or Sheep will make the best investments this year.

Conclusion
As Chinese, we’re always interested in Feng Shui and what the heavens had to say. We may pay more attention this year than last as CLSA’s Feng Shui index was remarkably accurate last year. For real astrological advice we defer to Master Lee. He is forecasting a second half rally much like us, but we believe the rally could be stronger than he predicts. In terms of sector, we both agree on water (transports, tourism, logistics) and entertainment (Macau gaming). He is a buyer of gold, but not HK property. It really all sounds very sensible.

If you want to follow Master Lee, we provide stock suggestions for the sectors he likes:

• Transport – Air China (753.HK), China Merchants (144.HK), Cathay Pacific

• Tourism – Ctrip, Homes Inn

• Entertainment – Sands China (1928.HK), Wynn (1128.HK), SJM

• Gold – Zhaojin (1818.HK)

Lucky number 7 & 1 stocks – Stocks above and: Yanzhou Coal (1171.HK), New World Development (17.HK), Tencent (700.HK), Cheung Kong (1 HK), Want Want (151.HK), PetroChina (857.HK), China Telecom (728.HK)

For the market, February 2011 should see a slow start to the year, with the Rabbit reluctant to emerge from its hole for fear the tiger still lingers. March calls for patience as opposing forces test investors’ metal. As the Rabbit finds his feet, wealth will come from the West in April and prove a great month for those with stamina.

May begins with one of the year’s four most auspicious dates (14 May), but we expect a tumble in June, providing a great buying opportunity for the savvy. Investors may want to rethink their summer-vacation plans: we see markets rising sharply over July and August. Money will flow.

With Fall comes a fall: the CLSA FSI predicts a sharp decline in September – but not for long. October marks a sustained market rally with money flowing abundantly through to the end of November. However, investors should remain focused as markets decline during December. Come January 2012, the Bunny bounces back to close the year on a high.

Sector-focused investors should pay attention to the five elements: Metal is hot, water is bubbly, fire is on fire, wood would if it could and earth is soiled. So where to invest? It will be a great year for Financials, Gaming, Gold, Resources and Transport. While gold didn’t break US$2,000 per ounce as we predicted in 2010, we are confident the Rabbit will provide the carrot this year. It will be a good year for Oil and Gas, Technology, Telecoms, Internet and Utilities, but an unexciting time for the earth-related Property sector.

In terms of the Zodiac, 2011 most favours those born in the years of the Cow, the Sheep, the Dog and the Pig, while Tigers and Roosters will experience a bumpy year. We foresee a great year for HK Tourism Board Chairman James Tien Pei-chun, a fire dog, and Kim Jong-un, North Korea’s well-fed heir apparent, a water dog whose birth date has been amended to make it more auspicious.

This year’s most auspicious dates are 14 May, 4 August, 15 November and 16 January, while the least auspicious are 16 June, 22 June, 23 September and 15 December.

All in all, the year of the Metal Rabbit provides great opportunity for investors to reap the rewards of astute investing, but they should be forewarned: those who chase two rabbits will not catch one.