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SINGAPORE (Feb 4): CLSA, for the 25th year running, has published its widely anticipated Lunar New Year predictions for the markets, which marry the art of fengshui with a keen observation of events and trends. For a brokerage founded by a group of business journalists, its predictions might not be entirely accurate, but it is nonetheless entertaining.
Given how events are shaping up, however, some of CLSA’s calls might just materialise. For example, with the ongoing momentum, the Vietnam market does look like it will take off this year. Already, it was among the hottest IPO markets in the region, raising US$3 billion ($4.03 billion) last year, or 80% of the total raised in Southeast Asia.
Similarly, the brokerage’s call on robotic processes being poised for “major gains” does look obvious.
It is also clear that climate change will be a growing concern. CLSA is prophesying that global temperatures will hit new highs, as fiercer storms than ever wreak havoc in the US. Consequently, environmentalists are also expected to come out stronger than before.
On the geopolitical front, CLSA has also made it quite clear how it views the UK prime minister, who is currently mired in the Brexit battle. In its instalment for the Year of the Dog in 2018, the brokerage wrote that Theresa May would be “hounded” out of office. This year, she is expected to “take up knitting”. Underscoring its point, the brokerage forecasts that the British pound will sink to hit parity with the US dollar this year. As at Jan 31, each pound sterling bought US$1.31.
In the same vein, CLSA forecasts the renminbi to weaken to RMB7 per US dollar. It is now at RMB6.70. Even so, CLSA expects China’s economy to continue to outperform that of the US.
In business, CLSA expects a new TV service to dethrone cable network HBO and streaming service Netflix. It also sees a serious hacking incident that will lead to a manifold increase in antivirus software used by large corporations. A major corruption scandal will break out — although it is worth noting such incidents are already happening far too often.
Based on CLSA’s reading of the elements, technology stocks should do well this year, although there might be a patch of weakness in the middle of 2019. Telecommunications, petroleum by-products and utilities will also “warm wallets and portfolios”.
As for construction and real estate, these two closely linked sectors should run well through the late summer, according to the brokerage. Industries associated with tourism, paints, logistics, hospitality and all forms of shipping will also do well. In the later part of the year, the education and environment-related industries, as well as healthcare and consumer companies, will have their turn in the sun.
Conversely, this coming year is believed to be unexciting for metal-related sectors. “Expect a year of restraint for financials and machinery, and more bank regulation,” says CLSA.
The brokerage has made significantly more outlandish predictions for the Year of the Pig, if only to draw some laughs. It sees the eccentric Elon Musk sending a car into space piloted by a pig; SenseTime, one of the leading Hong Kong-based AI firms, including pig facial recognition in its latest software; and pigs gaining recognition as the builders of most Mesolithic stone circles.
Other predictions: Mexico will dig a long trench to keep US citizens out, and US President Donald Trump will retreat to Miami and not tweet for days.
Be curious, adaptable and resourceful
How did CLSA do on its predictions last year? The brokerage did manage to sniff out some general trends. For instance, it predicted that scientists would produce edible straws, bottles, cups and shopping bags to combat pollution. Today, there is a growing movement against the use of plastic straws.
However, while CLSA bet on blue-collar provincial workers in China driving growth in the country, the world’s second-largest economy started to slow down by end-2018.
Some other predictions were way off the mark. North Korea did not sell all its nuclear weapons to Nuclear Non-proliferation Treaty members; and Australia, a nation of cricket and “footy” players, did not advance past the knockout stage in the 2018 FIFA World Cup, much less win the tournament.
And of course, CLSA’s interpretations of the elements and the zodiac failed to foresee the biggest story to dog 2018: the US-China trade war.
At the end of the day, 2018 turned out rather unexpectedly for just about everyone, and there is no real way of knowing where 2019 is going. The trick for the Year of the Pig, then, is to be as curious, adaptable and resourceful as the actual animal.
This story appears in The Edge Singapore (Issue 867, week of Feb 4) which is on sale now. Subscribe here