A publication in the business column attracted my attention today – Year of the Water Snake Prediction. I have always knew that there are people who have been relying on FengShui, or particularly “Flying Stars” and “5 Elements”, in identifying investment opportunities around the world, but I never expect to see such kind of advice appear in the newspaper. In this post, we shall see whether the economic predictions based on Feng Shui are aligned with those predictions of research houses and my opinion on sectors to focus in 2013.
Let’s start off by looking at the views of our Feng Shui Masters on our overall economy.
“Malaysia has the presence of the growth star, so I feel Malaysia is actually going to do better despite what everyone says. People are willing to take more risk in Malaysia and Singapore. You will be surprised. Malaysia will be better this year than last,”
– Joey Yap –
“South-East Asia is governed by Star 4, which is a star of growth. Star 4′s wood element is able to control and counter the 5 Yellow earth star. Furthermore, Malaysia is born in the Year of The Rooster. The combination of the Rooster with the Snake year is a good one. So as a comparison to the whole world, South-East Asia is doing well, and Malaysia will grow,”
– Joey Yap –
“There will be clashes in the first six months, but things get a lot more smoother and stable in the second half. Hence my strategy will be for investors to start accumulating now and sell during the second half,”
– Kenny Hoo –
It seems like our Feng Shui masters are rather bullish on our market. So which sectors are expected to do relatively better? The Feng Shui masters assert that Wood-based industries (timber, furniture, healthcare, sports, education) and Fire-based sector (telecommunications, oil and gas, palm oils, electronics, airlines) are expected to thrive this year, with the latter being lackluster compared to the former in Malaysia. Instead of flipping properties, Yap advised investors to buy for long-term investments as property is expected to grow at a slow pace this year given that “earth element is not in abundance this year”.
The newspaper also presented the CSLA Feng Shui Index, which is a one-year prediction of Hong Kong’s Hang Seng Index based solely on FengShui (see below). CSLA was founded in 1986 and have been constructing the CSLA Feng Shui Index since 1995.
According to the report, the Hang Seng Index is expected to rise steadily in the first half of the year before giving way to a huge correction in August. The reason for the drastic fall in August would be due to the diminishing of the Fire element, the element that govern a stock market’s well being. Overall, however, we should see some gains in Hang Seng for 2013.
Alright, enough of Feng Shui talks. So what sectors are the focus of our research houses this year? I have summarise the prediction of a few research houses on sectors that are expected to outperform below.
RHB – Banking, telecommunication, utilities, healthcare
UOBKayHian Research – Telecommunication, construction, gaming, airline
HwangDBS Vickers Research – Property, banking, construction, oil and gas
TA Securities – Construction, property, oil and gas
Mercury Securities – CPO Stocks, property
Nomura Equity Research – Banking, construction, plantation, oil and gas
Kenanga Research – Banking, oil and gas, power utility, consumer foods and beverages
Inter-pacific Securities Sdn Bhd – Commodity
Obviously, the appetite of research houses differ. Only RHB favor Wood-based industries (healthcare). The focus is more on oil and gas, a Fire-based industry, as a stream of projects are expected this year. Banking, which belongs to the Metal element, also gains its popularity among the research houses due to attractive valuation and steady loan growth. Construction and property sector are among the industries that are deemed attractive as well despite being seen as laggard in growth from a Feng Shui perspective. Overall, the research houses’ interests do not seem to align much with the Feng Shui predictions.
My opinion? Since 2012 was telcos’ year, I will not expect it to outperform again this year. In fact, in the past few months, we have seen Telcos forming double tops or lower highs. This shows a possible change in trend and we will likely see a decline, or at least a consolidation, for Telco stocks. I’m particularly attracted to Airline stocks because reflexivity has – and will further – causes the share price of airlines to decline to a bargaining level we rarely see. As long as the fundamentals of the industry and the companies stay intact, the reversal is imminent because a decline due to unjustifiable prejudice is unsustainable. My attention is also on companies that are involved in Crude Palm Oil (CPO) since a possible recovery in CPO price could bring the stocks of these companies to greater heights, although the outlook is still bleak at the moment due to our high inventory level. CPO was hammered last year to a worrying-low of around RM2,200 per tonne due to low demand. We should see CPO price recovers as China regain its growth.
Oil and gas should be a sector worth looking at although most of the stocks in this industry had topped the gainers list in the past few months. These, among all, include Alam Maritim , Perdana Petroleum , Perisai  and Skpetro . Moving forward, streams of expected projects this year and a rosier general market condition should serve as good catalysts for the market participants to acquire shares in this sector, thereby pushing the price up. Technically speaking, most of these shares are currently at a downtrend, searching for a right base to consolidate. It would be wise to wait for reversal signals before getting yourself a hand on these shares. On banking, not much of movement is seen in 2012, so it would not be a surprise to see a move this year. If you like property shares, your focus should be on companies that are involved in the development of Iskandar, such as Mahsing  because that place is HOT! It is fast growing and is attracting a lot of foreign investors! If you plan to stay defensive this year (although it’s not recommended), food and beverages, consumer products and healthcare should be the play, but do not rush in now because funds are moving out of these sectors, causing a decline in most of their companies’ share prices. Like I’ve always said, wait for a confirmed trend reversal pattern before buying into a share that is in a downtrend.
That’s all from me this time, hope you enjoy reading.
Happy new year, and happy holiday. Cheers!