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Head of Fixed Income Strategy
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Will the Year of the Pig bring you fortune?
Jane Fu
Singapore Sales Trader
Summary: Many Chinese people take the symbolism of traditional zodiac signs very seriously indeed. But can there really be any correlation between the attributes of the individual year-signs and stock market performance?
In about a week’s time, Chinese people at home and all around the world will celebrate the Lunar New Year, enjoying time with their families, catching up with friends and exchanging traditional “red envelope” gifts. The Chinese lunar calendar is based on a twelve-year cycle and every year is named after one of 12 animals, namely rat, ox, tiger, rabbit, dragon, snake, horse, sheep, monkey, rooster, dog and pig, and each animal has its own unique character. 2019 is the year of pig in the Chinese zodiac.. It is very common in Asian culture to link zodiac signs with personal behaviour and one’s fortune in a certain year. Although this may be seen as pure superstition, it is also not uncommon to see people trying to link stock market performance with the Chinese zodiac. Understandably, zodiac culture has often affected the way people make decisions. In this article we’ll try to see whether the stock market returns were indeed affected by the zodiac.
We studied the historical performance of Hong Kong’s Hang Seng Index and the S&P500 index in the US.
The Hang Seng Index reflects the performance of major Chinese stocks. When the Hang Seng Index was first introduced internally to Hang Seng Bank staff, its base of 100 points was set equivalent to the 33 component stocks' total value as of the market close on July 31, 1964. The index was only published after November 24,1969. We will study the historical data of Hang Seng Index from 1965 to 2018, which completes more than four full cycles of the Chinese zodiacs.
The graph below shows the year of the pig has been the third-best year for the Hang Seng Index. Past years of the pig have averaged a return of 33.80%, just behind the year of the rat (42.38%) and the year of the rooster (39.23%). The rat years show the highest gains while the snake years display the biggest losses. These findings are consistent with the common belief in Chinese culture where the snake is viewed as a phlegmatic and cold animal.
Our study also uncovered a possible explanation as to why 2018, under the sign of the dog, was such a bad year for traders in the Hong Kong market. The year of the dog has the second-worst performance among all zodiac signs. The findings of this study would have provided advance warning that 2018 would be a tough year for traders who trade the Hong Kong market – the dog did indeed bite. Now that we are waving goodbye to the barking dog, we hope the good-natured pig will give us a year of steadiness and reward with good returns.
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