CLSA Feng Shui Stock Market 2014 Review

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The 2014 CLSA Feng Shui report is finally out.  The report has a few sections but two sections are of particular interest to me and other investors alike - the monthly Feng Shui forecast on the stock market (Hang Seng Index) and the Feng Shui influence on each of the sectors in 2014.

The CLSA Feng Shui report makes a bullish forecast for 2014 in general.  The Year of Horse is likely to kick off with a strong showing in February.  In March and April, markets are likely to remain range-bound before enjoying another strong uptrend in May.  According to the report, the month of May is where the bull is likely to be as strong as February, if not stronger.

I am not surprised that the report was bullish on the Hong Kong stock market for the months of February and May.  February is not only the start of new Lunar Year but is also marked by a combination of Flying Stars in the Northeast which embodies wealth creation.  In my earlier post on Feng Shui and Stock Market Forecast 2014 - Timing Stock Market Correction in 2014, I mentioned that the most auspicious months for the U.S. stock market in 1H2014 are March and May.  April is average at best while February and June are vulnerable months where US stock market might experience a correction.

The CLSA Feng Shui forecast is slightly different from mine, which is not surprising since the methods on which our forecast are based are different.  Moreover, while my forecast (and focus) is on the US stock market, the CLSA Feng Shui forecast is made on the Hong Kong stock market.

Personally, I am more bullish on global stock markets for the month of March than CLSA Feng Shui forecast suggests.  As regard to February, while the flying star combination residing in Northeast (where Hong Kong is located) symbolises wealth-creation, the flying star combination in Northwest (where U.S. is located) is not auspicious. Therefore, I remain guarded on on the prospects in February.  A correction on the US stock markets will not be good for the Hong Kong stock market - thus my caution for the month of February.  Having said that, I am not downright bearish for the month of February because it is after all the start of a new lunar year - a year which is marked by more auspicious than inauspicious stars.

 May - Strongest month for global markets?

One forecast which we both seem to agree on is for the month of May.  From Feng Shui point of view, it is not difficult to be bullish for the month.  Virtually all the stars in the different sectors form an auspicious combination.  In particular, the Northwest sector will see Star No 4 visiting which forms a Metal combination with Period Star No 9.  The resulting Metal will reduce the negative effect of Annual Earth Star No 5 and further strengthen the inherent Metal element of Northwest sector.   As for the Northeast sector, the month of May will also have wealth Star No 6 visiting.  The only negative aspect is that the monthly Star No 6 will clash with Annual Star No 7.  However, this combination, inauspicious as it is, will only strengthen the Metal element in that sector and when combined with the Earth elements present in the Northeast will produce more wealth.  May is likely to see some heightened political conflict involving the two Korean nations or China and Japan. Despite the negative news flows on the geopolitical front, stock markets are likely to ride a wall of worry on a firm and strong uptrend.

Fed to pause tapering in April's FOMC meeting?

       

May is typically a tricky month for stock markets in general.  The "Sell in May and go away" mantra is not without historical evidence. Nonetheless, for 2014, May is likely to be a good month (best in 1H2014).  What might cause the strong rally in May is anybody's guess.  If I were to make a guess, it is likely to be a pause in the tapering of bond purchases by the Fed in their FOMC meeting on 29-30April.  This should provide a positive uplift to the global stock markets.  Another possibility is an interest rate cut by the China Central Bank or a stimulus measure undertaken by the chinese government in response to the economic slow down.  Typically, January and April tend to be tricky months for the China stock market in the past as investors anticipate a rate hike just days prior to the Lunar New Year or before the long summer holiday in China begins in May.  (Central bankers like to hike rates before a long holiday or weekend to soften the impact of the rate hike on financial markets).  If global economy slows down in tandem or stock markets undergo a nasty correction in April, it is possible that the governments or central banks "get together" to stimulate the global economy again.

Bullish on Plantation, Soft Commodities and Technology

The CLSA Feng Shui team is bullish on sectors such as plantation, soft commodities, techonology, transport and retail and bearish on sectors such as resources and property.  I agreed with most of their bullish views and their bearish view on property.  As for resources, I am more bullish because of the confluence of the auspicious flying stars in the metal mining regions such as South Africa, Mexico and Peru. I understand where their bearishness on the sector comes though - this is a strong Fire year and Fire destroys Metal.  But I will be happy to stick with my view because I also believe that the recovery in the global economy will spur more demand for the industrial metals.

I personally think that plantation and soft commodities will perform well this year but I am not sure about retail or technology. Though I agreed that this year favours sectors which are associated with Wood and Fire, these two sectors have performed rather strongly in the last two years. I would rather choose energy sector particularly, natural gas-related， renewable energy-related and LED sectors. In my opinion, they offer better value and more upside to investors in 2014.


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Feng Shui and Stock Market Forecast 2014 - Timing Stock Market Correction in 2014

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In my post on Feng Shui and Stock Market Forecast 2014, I have made my forecast on the asset class and stock market which will likely to be the outperformers in 2014 and in my post on Feng Shui and Stock Market Forecast 2014 - Part II, I made my forecast on the various industries/sectors which are likely to be outperformers in 2014.  In this post, I focused on the timing of a market correction in the US stock market in 2014.

At the time of writing, almost all investors are wondering when the big correction in the US stock market will arrive.  It has been more than a year since the Dow or S&P 500 has seen a correction of 10% or more.  Here, I shall use the monthly Flying Stars in an attempt to assess the likelihood of the US market having a correction in the first half of this year. 

January looks like a safe month for the market. The monthly Star No 1 forms an auspicious combination with annual Flying Star No 6 in Northwest.  In February, the annual 2014 Flying Star starts to kick in, and Northwest sees annual Flying Star No 5 combining with monthly Flying Star No 9.  As this is an inauspicious combination, there is a good chance of a stock market correction during this month.

March, April and May look like safe months for the US stock market and a major correction in either of these months is unlikely.  The star combinations of 5-8 and 5-6 in March and May respectively signify that the stock market is likely to do really well during these two months.  In April, the Metal Element of Monthly Star No 7 will also reduce the negative Earth influence of Annual Star No 5.  April is not a good month but a major correction during the month is not probable too.

In June, the double 5-5 star combination comes into play.  This combination is rather inauspicious and it is likely that a major correction will take place this month.  In July, the star combination is 5-4 which is also an inauspicious combination.  But monthly Star No 4 combines with Period Star No 9 to form a Metal combination which reduces the negative influence of Annual Star No 5 and enhances the Metal Element of the Northwest sector.  Thus, any correction in June is unlikely to last into July.

To summarize, February and June look like bad months for the US stock market. March and May are probably the best months.  A major correction in US stock market is unlikely to last long as the negative months are followed immediately by auspicious months.

Looking from the lens of a financial investor, the appointment of the dovish Janet Yellen is bullish for the global stock markets. The new Fed Chairwoman will chair the first Fed meeting in March. Should there be a meaningful correction in the US stock market in the February, it is likely that the new Fed Chairwoman would put a pause in the tapering of bond purchases or give a positive forward guidance to pause the tapering in the coming months.  If markets do not correct in February, non-farm payrolls might disappoint again after coming in way below consensus in December. Either way, the period from March-May looks like a good one for the US markets.  

Conclusion: 2014 promises to be another good year for global stock markets in general.  Though the US market is likely to underperform other stock markets, the probability of a major crash is unlikely, especially in the first half of the year!

Update: Compare my monthly stock market forecast with CLSA Feng Shui Stock Market 2014 Review.

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SMRT's Feng Shui Woes

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In recent years, the two major transport companies in Singapore, Comfort Delgro and SMRT, experienced a series of trains and buses' breakdown which provoke the ire of many Singaporean commuters.  They could not understand why despite the constant fare increase which are purportedly meant to improve the train and bus services, the breakdowns keep on happening.

What most Singaporeans don't realize is that of the two companies, SMRT has much more train breakdowns than Comfort Delgro.  Granted, their networks (North-South line and East-West line)  are much older and thus more susceptible to break downs caused by wear and tear.  However, problems also plagued their Circle Line which come into operation only two years ago.

Besides frequent train breakdowns, SMRT also has to contend with a strike by its Chinese workers and a fatal bus accident along Dairy Farm Road, among other highly-publicized woes.  The company came under a lot of pressure from the public and in early 2012, its CEO, Ms Saw Phaik Hwa, resigned from the company.

 

Feng Shui of SMRT's Headquarters' address

 

To understand its problems from Feng Shui perspective, one has to study the Feng Shui of its office headquarters. I have no information on that since I do not work in SMRT or have friends who work there.  However, going by the address of its office headquarters, we can do a simple analysis of the Feng Shui of its office headquarters. In Feng Shui, every number has a Feng Shui effect and can be associated with a Star number (or Gua number).  From my experience, these effects are usually secondary to the Feng Shui of the unit itself.  Nonetheless, the influence is still there and since this is the only information I have with regard to the Feng Shui of SMRT's headquarters, I shall base my entire analysis on these numbers.
 

The address of SMRT's office headquarters is 251 North Bridge Road, S179102.  A simple analysis of this address does not spell good for the Feng Shui of SMRT.  First of all, the unit number 251 is not a particularly auspicious number for a transport company.  Numbers 2 and 5 are the most inauspicious numbers in Flying Star Feng Shui and Number 1 stands for transport. Numbers 2 and 5 are also associated with the Earth Element which destroys the Water Element of Number 1.  Moreover, the direction North is also symbolised by Star No 1.  Therefore, one would interpret that the transport company is being destroyed by notorious numbers 2 and 5 which represent mishap, illness, death, accidents, obstacles, etc.

 

Period and Annual Stars

 

A more thorough application of Flying Star Feng Shui also has to take into account the effects of the Period and Annual stars. And here, we can see that these stars (particularly the Annual stars) are also highly inauspicious. To apply the Period and Annual Star analysis, we need to first convert the numbers in the address into Feng Shui Gua Numbers.

 

In Period 8, Gua number 8 is represented by Number 1, Gua number 9 represented by Number 2, and so on (please see table below).  Zero is irrelevant and thus ignored.

 

Gua No	8	9	1	2	3	4	5	6	7	8	9	…	1	…	6	…	6
Number	1	2	3	4	5	6	7	8	9	10	11	…	102	…	179	….	251

   

We can see from the above table that number 251 belongs to Gua number 6 in the current period. If we break down the postal code 179102 into 179 and 102, the corresponding Gua numbers are 6 and 1.

So the Period Gua numbers derived from the address are 6-6-1. These are auspicious numbers especially fitting for transport companies. No surprise that SMRT, a major transport company will have an address which has these Gua numbers.

 

Inauspicious Annual Stars

 

So if the Gua numbers are auspicious, why does SMRT experience such difficult times from 2011-2013? The answer to this lies in the annual flying stars that reside in the numbers from the address.

 

In 2011, the Annual Ruling Star is No 7 which means that 6-6-1 will be transformed into 5-5-9.  Gua number 5 is a highly inauspicious number and when combined with the Fire Element of Gua Number 9, its negative influence is enhanced.

 

In 2012, the associated numbers are 4-4-8 which, though not highly inauspicious, are not a particularly auspicious combination as well.

 

In 2013, the associated numbers are 3-3-7, a combination which often brings political dispute, strike, demonstration, stress, etc.

 

It is noteworthy that the strikes by SMRT's Chinese drivers took place in Nov 2012 but the news continued to steal the headlines well into mid-2013 when the star numbers 3-3-7 dominated.

 

Fatal bus accident by Bus 700A

 

In July 2013, an accident involving SMRT bus no 700A took place along Dairy Farm road.  A 19-year old male passenger was killed in the accident.  Why did the accident take place and why did it involves bus number 700A?

Let's take the first digit from the bus number 7 and ignore the zeros.  In 2013, the Gua number associated with it is number 2 while the Gua number associated with the letter A is number 5.  For those familiar with Flying Star Feng Shui, this combination of 2-5 is probably the most inauspicious and deadly of all combinations, often symbolises death by accident or illness.  Notice that the accident involves Bus no 700A and not Bus no 700 because the former has a Gua number 5 associated with it, forming the deadly combination of 2-5.   

As I mentioned above, the above Feng Shui analysis only took into account the Feng Shui implications of SMRT's office headquarters' address.  I believe that a thorough review of the Feng Shui of its office premises will shed even more light on the reasons for its recent problems.  If anyone has information on the details of SMRT's office premises (facing direction of main entrance, location of main entrance, age of building, etc), I will like to hear from you.
 

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Feng Shui and Stock Market Forecast 2014 - Part II

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In Part I of my Feng Shui and Stock Market Forecast 2014, I made my forecast on the 2014 performance of various asset classes such as US stocks, European stocks, emerging market stocks, US bonds and commodities. In the post, I forecasted that European stocks are likely to be the clear steady winner in terms of performance while US stocks are likely to fare the worst.  I also have bullish outlook on commodities, particularly the metals and agricultural commodities segment.  

Nonetheless, no forecast on the stock market is complete without a discussion on the industries or sectors which will perform well in a given year.  So which sector would I place my bet on in 2014?  Obviously, since I am bullish on the commodities, it follows that investing in commodity-related stocks will be a good start.  Commodities stocks have been massive under-performers over the last few years.  In 2014, this trend is likely to reverse and commodities stocks should take over the leadership from other sectors like consumer staples and technology. 

Wood and Fire Stocks

2014 is the year of Wood Horse.  Since the element associated with Horse is Fire, industries related to Wood and Fire are likely to perform well.  Moreover, the Annual Ruling Star in 2014 is Star No 3 which is also of Wood element and since Wood produces Fire, industries associate with Fire should do extraordinary well. 

Industries associated with Wood Element includes Timber trading, Furniture, Construction, most plantations, etc. Industries associated with Fire Element includes oil & gas, energy, most Food and Beverages, LED and other Display, etc.

My strongest conviction among these industries is the renewable energy stocks (particularly biofuels and solar-related) and LED stocks. Biofuels, solar and LED stocks have underperformed the markets very badly over last few years and this year should see them steal the limelight.  

From a Feng Shui point of view, biofuels (corn or sugar ethanol, rapeseed or palm oil biodiesel) belongs to Wood-Fire Element which gels with 2014 Elements.  Though rising agricultural prices will increase the feedstock costs of these companies, demand for biofuels should be strong and these companies will be more than able to pass on the cost increase to end-consumers. 

How strong is my conviction on biofuels and solar sectors?  Well, I will just say that the Feng Shui factors for these two sectors in 2014 is almost identical to the ones present in 2013 for Tesla Motors. 

Tesla Motors - beneficiary of good Feng Shui in 2013

One only has to look at the share price performance of Tesla Motors to have a feel on how well these two sectors will perform in 2014.  The share price of Tesla Motors went up several fold in the last 12 months. From a Feng Shui perspective, cars are associated with Metal Element while battery-operated cars from Tesla (especially model S) are associated with Water-Fire Element.  2013 happens to be the Year of Water Snake which is associated with Water-Fire Element.  The predominant Element of Snake is Fire but it also has hidden Earth and Metal Elements.  Thus, from Feng Shui perspective, it is not surprising that Tesla Motors did very well in 2013. 

Solar Stocks

The solar industry has been hampered by overcapacity in the last few years.  During the last few years, several solar panel companies have filed for bankruptcy.  Prices of poly-silicon, a raw material used in the production of solar panels, plunged to a multi-year low.  Countries like U.S., China and Europe start to impose stricter tariff on imports of solar components to protect their local companies. I believe that after the shakeout in the last few years, the solar industry is poised for a recovery aided by the positive Feng Shui influence in 2014.  It is interesting to note that most solar-related stocks such as GCL Poly and OCI Co bottomed out in mid-2013 and the share price has picked up quite significantly.  From Feng Shui perspective, the first half of the Water Snake Year is marked by Water Element which is inauspicious for solar stocks.  In the second half, the Fire Element of the Snake took over and it boosted the sentiment towards the solar stocks which are associated with Fire.      

Biofuel

Among the three sectors I am particularly bullish on, the biofuel industry is the one which will enjoy the most favourable Feng Shui in 2014.  Biofuel (ethanol and biodiesel) are energy sources that make use of agricultural crops such as sugar, corn, rapeseed, palm oil, etc as feed stock to produce energy.   Sugar and corn are feed stocks used produce ethanol which are often blended with gasoline to fuel gasoline-powered cars. Rapeseed and palm oil are often used to produce biodiesel which are blended with diesel to fuel diesel-engine cars.  Different countries have laid down different mandates on the blending of these biofuels with gasoline or diesel.                

 

U.S. is the largest producer of ethanol.  US ethanol production has grown rapidly in the last several years.  The ethanol market share in the US has grown from over 1% in 2001 to 10% in 2011.  By 2011, most cars can run on blends of up to 10% ethanol.  Some E-85 flexi-cars can run up to 85% ethanol.  Despite the strong volume growth, most ethanol companies have not been performing well as rising cost of feed stock (particularly corn) has eaten into their margins. Most companies rely on subsidies from the US government to remain viable.  However, these subsidies expired in December 2011 which dealt this industry an extra blow.  

In Europe and Asia, the blending of biodiesel into diesel engines has also been gaining steam in the last several years.  Despite the Eurozone crisis in 2011-2012, most European countries have mandated the blending of biodiesel with diesel.  Like in the case of US ethanol companies, most biodiesel companies have been adversely affected by the weak crude oil prices following the Global Financial Crisis in 2008 and the subsequent strong feed stock prices. 

In 2014, the biofuel industry will see an increase in demand due to the recovery of global economy.  While I expect to high feed stock costs to persist, my view is that this will be more than compensated by higher biofuel prices as demand for gasoline, diesel and biofuel increase. In the first half of 2014, this industry will benefit from the Wood Element.  In the second half, the Fire Element will even be more beneficial.  Thus, 2014 should see steady and strong performance of biofuel stocks.   

Light Emitting Diode (LED)

Light Emitting Diode (LED) is used mainly in backlight units of television sets with LCD screens.  It is also an energy-saving alternative to conventional light source. Just like the solar industry, over the last few years, the LED industry has been hampered by overcapacity woes.  Despite its energy-saving characteristics, the switch from conventional light source to commercial LED light has been slower than expected due to the huge price premium the latter commands. Most of the demand has come from governments' buying while demand from the private sector remains lacklustre.

In Feng Shui, the LED industry is associated with the Fire Element.  Both the Wood and Fire Elements of Wood Horse in this year are favourable to its prospects.  Meanwhile, the last few years have seen several leading LED module and packaging companies successfully removing a large part of inventory overhang.  Along with continued increase in demand from official buying, a turnaround in 2014 is in sight.  Overall, I am optimistic on the prospects in LED industry in 2014.  

Conclusion

In summary, sectors which are wood-fire or fire only-related will do well in 2014. Commodities-related, Food & Beverages, Oil & Gas, etc are some industries which will enjoy good Feng Shui.  In particular, I am bullish on solar, biofuel and LED sectors.

Update: For timing stock market correction in 2014, please refer to Feng Shui and Stock Market 2014 - Timing Stock Market Correction in 2014.

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