2005 - Year of the Rooster

Excerpt from TODAY Newspaper

Will markets get a boost in the Year of the Rooster?

According to Master Ong Thiam Peng of I-Ching Geomancy Centre, the I-Ching or the teachings of China's ancient book of wisdom, called for humility and caution last year.  Those who had adhered to this call would have been less affected by the turbulence seen in the past Year of the Monkey.

Master Ong is no ordinary feng shui expert. He had correctly predicted that a war would break out between Iraq and the US but he also said that it would be a short war and that it would create opportunities for traders to make money.

This was borne out as equity markets corrected sharply in 2003, weighed down by the Middle East conflict and concerns about SARS. The sell-off created opportunities and those who bought into equities in March/April of 2003 were handsomely rewarded in subsequent months.

Lessons from the Year of the Monkey

At the start of last year, investors were generally optimistic and expected a good year for the investments. This is because they reckoned that the Monkey is a clever, witty and inventive creature that is also quick and sociable ˇV all of which seemed to promise a swinging year last year.

But contrary to several predictions, Master Ong had warned that the Year of the Monkey may not be as dandy as some would like to believe.

He said that the tail of the Monkey was still wet although it had crossed a dangerous river in 2003. As such, he reckoned that the Year of the Monkey was likely to be riddled with uncertainties and risks, including political uncertainties in Asia in the run-up to several general elections in the region, the possibility of heightened tension between China and Taiwan and a step-up in protectionism as the US Presidential elections approached last November.

So for those who were looking to invest in equity markets last year, Master Ong had advised that they remain nimble and not be too greedy i.e. look to take profits when prices rise and ideally buy on sharp dips that could come with bad news like terrorist attacks and political uncertainties.

He also advised against investing in stock markets too aggressively. He said that investors should hold on to some cash and put some of their money into less risky products as the Book of Changes or the I-Ching suggested that being modest or adopting the virtues of humility was a desired route in the Year of the Monkey.

Despite his cautious outlook, Master Ong said that investments would do better in the Year of the Monkey compared with the Year of the Goat in 2003. This is because businesses were likely to have a better year as the global economy improved.

Last year was indeed a better year for the economy and businesses. Singaporeˇ¦s economy for example, posted strong economic growth of about eight per cent, double the rate predicted at the start of the year. Several companies here and elsewhere also reported strong growth in profits.  Consequently equity markets headed higher last year, but they did not rise as strongly as 2003 because extreme volatility and uncertainties kept many investors on the sidelines.   

The Year of the Rooster ˇV A Year of Stagnation

The Rooster is a down-to-earth bird which does not fly like other birds. In the same vein, Master Ong expects the Year of Rooster to be a relatively uneventful one unlike the turbulent times seen in the past two years.

In the past two years the world had experienced two major events which shook confidence, especially in Asia. First was the outbreak of SARS in 2003. This was followed by the Tsunami disaster last December.

In contrast, Master Ong expects the Year of the Rooster to be a much calmer period marking the end of negativities and calamities seen in the past two years.   He said that according to the I-Ching, the Year of the Rooster will be characterised by stagnation.

In other words, global economies and markets are likely to consolidate this year in preparation for what is likely to a good year next year.

So while global stock markets may not see much fireworks this year, it is nevertheless likely to be a good year for those who have an investment horizon of two years.

Master Ong is more positive about the outlook for next year as he thinks that with elections over in many key parts of the world, the leaderships in these countries now have clear mandates to undertake bolder policies and initiatives which could propel their economies to new heights.  This should augur well for global equity markets.

No risk of a US dollar collapse

While many forecasters have made dire predictions about US dollar and see it as a major risk factor to keep in mind this year, Master Ong has a different view.

He thinks that the US dollar is unlikely to collapse as its direction is propelled more by the policy actions of major world governments and less so by pure economic fundamentals like trade and current account balances and interest rates.

Also, a collapse in the US dollar will result in a radical change in the global currency system ˇV something which global leaders are not prepared for and which is inconsistent with a period of relative stability expected during the Year of the Rooster.

Master Ong who has intimate knowledge of the economic and political system in China,  also thinks that the country will eventually yield to international pressure and revalue its currency - but not before it negotiates for some significant concessions from the major industrialised nations.

But do not take the Rooster for granted

Despite his fairly positive prognosis for this year, Master Ong warns that one should not take the Rooster for granted. It has the capacity to jump unexpectedly and cause hearts to flutter. Much depends on what he calls ˇ§the human factorˇ¨.

In other words, the relative stability which he predicted for this year is contingent upon the ability of global leaders to make good economic and political decisions. Failure to do so could cause investors to become nervous and consequently, markets could run into turbulent patches once again.

Master Ong also highlighted that there is risk that the Bush administration may up the ante in its fight against terrorism by challenging Iran and North Korea, just as it had challenged Iraq before attacking it in 2003. If this happens, investors may be spooked and market confidence could be derailed.

So while throwing caution to the wind may not be wise, it would appear that investors can look forward to mildly better times in the year ahead and a more positive outlook next year.