No neigh-sayers in CLSA's outlook for HK

In the world of fortune telling, sometimes it's hard to say what's more reliable: economists' formulas or feng shui masters' predictions.

Based on a group of feng shui calculations, CLSA Ltd published its 20th annual Feng Shui Report on Wednesday, providing a tongue-in-cheek financial forecast for the upcoming Year of the Horse.

According to the report, the Chinese Lunar New Year, which will start the Spring Festival, will be "very bullish" for the benchmark Hang Seng stock market index.

"We expect the market to perform like a raging bull this year, as horses are energetic creatures," said Mariana Kou, an investment analyst at CLSA, at the press briefing in Hong Kong to launch the report.

"There are two key reasons for our call. First, the Wood Horse is full of fire, which will bring investors' sentiment to new highs. Second, we uncovered cheerful links between the horse and the Hang Seng Index," Kou added.

Ho Sin-hang, chairman and founder of Hang Seng Bank, said the Hang Seng Index was launched in 1969, which was a Year of the Rooster. According to the report, although horses and roosters don't have much in common, this year, the wood horse's feng shui pattern is the same as when the index was born.

"We'll see a beautiful friendship between the horse and the rooster," Kou said. "And this should be very rewarding. Our forecast sees the index reaching 28,105 points in 2014."

On Wednesday, the Hang Seng Index closed at 23,082.

According to Kou, the market will start strongly this year. The first quarter should see the index rise, with volumes picking up, but the market may lose momentum in April. Then it will rebound in the second quarter and will reach a peak in the middle of the year, she added.

"Technology, telecom and Internet sector shares should perform well in the first half, because they belong to the fire element in the Wu Xing," Kou said. "Oil and utilities firms will also perform solidly throughout the year."

The Wu Xing, or the five elements, is a conceptual system used by feng shui masters to make predictions. The elements in the Wu Xing are: metal, wood, water, fire and earth.

In the second half, the market could be a little bit bumpy due to the "characteristics of the horse," Kou said.

September will see losses widen in a market full of rumors, but investors will see a small rebound in October as fire creeps back into the market, she added.

In January 2015 - the last month of the Year of the Horse - the five elements will be aligned and give the market a good finish, Kou said.

According to the report, the best-performing sectors this year share an element of wood, which is the same as this year's Wood Horse. These sectors are: retail, especially clothing stores; traditional media; soft commodities; as well as agriculture and forestry.

"Those shares will be lifted in the first quarter until April and pick up again in October and November," said Emily Lam, an institutional sales manager at CLSA.

Stocks related to the metal element, such as autos, the finance sector, metals and machinery, will see a lackluster performance in 2014, she added.

Meanwhile, investors should also be careful with sectors related to the earth element, namely construction materials, property, pharmaceuticals and resources.

"In general, these sectors will be weak in 2014," said Lam.

Some investors were skeptical about the report.

"I think the Hang Seng index will not hit 28,000 in 2014," said Chan Wai-kit, a stock market investor. "Though the US' tapering of its quantitative easing program is gentle, it will have a negative influence on market liquidity. Meanwhile, the economic reform on the mainland is still ongoing. There are too many uncertainties."