asia up, australia down, $a up, page-6

Grant, I cannot agree with you. As I see it the USD may implode (almost certainly) but the AUD will not. Do not be mislead by the Asian rise. It is a well known fact that every year, almost, the HK stock market rises about 20% from Sept to Lunar New Year. Lunar New year falls on 21 Jan this yr. It is local facts that drive it. Also China is seen as the big place to go for fast profits at the moment.

Read this column from Jake van der Kamp.

Thursday November 6 2003

PICC sale food for thought, not for eating


Jake van der Kamp

SHADES OF TOM.COM. This newspaper yesterday carried a 16-page section of tightly spaced small print setting out the winning application numbers for shares of PICC Property and Casualty Company.

I cannot offer you an opinion on the merits of this stock offering and I am sure that most of the people who applied would not care for one either. You know the old joke about the crate of sardines that was bought and sold over and over again at ever higher prices until a buyer decided he was hungry. He opened a tin to find all the sardines rotten and promptly complained.

'You fool,' said the person who had sold him the crate. 'Those sardines aren't meant for eating. They're meant only for buying and selling.'

PICC to my mind looks like one of those offerings meant only for buying and selling. Do not bother to open it and look inside. We have a bull market phenomenon here, something that few people would have expected so soon after the gloom of the Sars epidemic but there you go. The market is up and the punters are back in.

And, to give their hopes a boost, perhaps this is an appropriate time for a reminder about the Lunar New Year rally.

What I have done for this is to take the daily closes of the Hang Seng Index since 1976 (earliest numbers I could find), set the beginning of each year to a new index base of 100 and then measured how the index performed from that base during the year. Take the average of 28 years and you get the first chart.

It says that the average yearly gain of the index over that period was just over 18 per cent. But now look more closely at that trend starting near the right side of the chart. On about December 15 of this average year the index suddenly begins to rise. Shift to the left side of the chart and you can see that this rally continues into the New Year and ends some time in early February.

On average, more than half the yearly gain is made in this period of about seven weeks.

I will let others debate why it happens. I have heard many theories. Given the general mood of optimism in the market these days, however, it is a good bet that we will see the Lunar New Year rally in full force this year.

Get ready to pull your wallets out.

But, then again, one can never be sure. The average year is not every year and 1976 takes the history of this phenomenon a long way into the past. Things change. Perhaps a more recent average year would show a different picture.

Good point. The second chart says that it does. It takes the average year as the average only of the past 10 full years and a different picture emerges.

This one says that if you buy at the beginning of the year, your portfolio goes up and down a little but not enough to make any real money and in September its value is likely to be less than it was when you bought.

It is sometime in late September that the rally starts and it comes to an abrupt halt at the end of the calendar year.

If you are still holding on at that time because it should be a rally that lasts through the Lunar New Year holiday, you will be disappointed. The trend of the index in January is down.

Of course, you may say that this 10-year average year is too distorted by the crash of the market in 1997 and 1998. That is probably true.

Let us therefore take those two years out and make up the 10-year average by including 1991 and 1992. The results now say you get a much better average yearly performance of the index but you still get the rally beginning in late September and ending at the close of the year.

If the second chart tells the story more accurately, perhaps your wallet should be open only to take in the proceeds of selling your stock about now.

Interesting, no doubt, but an example of opening the tin of sardines to have a look inside. I doubt that buyers of PICC will bother.