By NORIKO OKEMOTO, NQN staff writer
The Chinese philosophical system is based on the five elements: fire, water, wood, metal and earth. Shum Chun-ying, CEO of Sincere Securities in Hong Kong, has studied the system with a focus on market analysis for over 10 years. He discussed the economic outlook for the coming Year of the Sheep in a recent interview with Nikkei Quick News.
Using Feb. 4 as the starting point and looking at the Four Pillars of Destiny -- a concept that the year, month, day and hour at the moment of birth decide fate -- the new year will be one in which abundant wealth cannot be fully enjoyed due to physical weakness, Shum said. "For example, individuals will be unable to benefit from high incomes. In macroeconomic terms, it means that despite the availability of funds, they will not flow into the real economy," he said.
Facade of strength
Though monetary easing in Japan and Europe will mean ample global liquidity throughout the year, the cash will mostly be used for investment and speculation, according to Shum. He said economic activity will remain sluggish throughout the year, even as stock prices rise on active trading. "Stocks will be strong worldwide but may suddenly turn downward, as their strength will not be backed by a recovery in the real economy," he warned.
Hong Kong's Hang Seng Index, for example, will likely reach an annual high of around 27,000 points sometime between May and September, but then enter a downtrend, the CEO predicted. At the end of January 2016, when the Year of the Sheep ends, the index is expected to be below its current 24,000 level.
Shum said the Shanghai Stock Exchange Composite Index also appears destined to climb to around 5,000 this summer, as expected by market players, before turning downward.
Stocks categorized as "metal" and "fire" are expected to perform well, Shum said. The metal sector includes banking, insurance and other financial issues. Gold shares are also likely to bounce back. The fire sector, he explained, covers electric power generation and radio wave-related equities, such as telecommunications and information technology stocks.
In contrast, sectors categorized as "water," such as retail and other consumption-related stocks, as well as casinos, are likely to stagnate.
China's trajectory: stability
With regard to growing concern about China's economic slowdown, Shum said: "The Chinese economy is solid, compared with other world economies, in terms of orientation." In other words, the government is steering the economy toward stabilization. "The worst situations are seen in the West and South, namely Europe, South Asia and Pacific regions," he said
Australia and other economies rich in natural resources will remain subject to downward pressure as resource prices continue to drop, Shum said.
Economic activity in Hong Kong will be weak as well. "Real estate prices in Hong Kong will likely decline because of additional hikes in interest rates, following those in the U.S.," he said.
Be patient, Japan
Shum projected a better year for the Japanese economy, compared with the previous Year of the Horse. The country will outperform Europe but fail to achieve a full recovery. For that, Shum stressed, Japan will have to be patient and wait for 2017 at the earliest.
"Disputes between nations tend to occur during the Year of the Sheep," the CEO said. Still, while there may be tension between Tokyo and Beijing, the signs suggest widespread anti-Japan demonstrations and other serious problems are unlikely.
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