Dr Doom snubs fung shui bulls in Year of the Ox

Today Hong Kong stockbrokers get down to the first full week of business since the start of the Chinese Year of the Ox, which may not turn out to quite so bullish as the year's name suggests.

Although sentiment is far from bearish, it seems unlikely that the market will be able to repeat last year's 34 per cent rise when the rat reigned supreme, giving its name to a year that saw tremendous excitement in the property sector. Property shares and property-related interests account for over two-thirds of the underlying assets determining the stock market's valuation.

Therefore, as ever, all eyes are on the property market. If the annual Credit Lyonnais fung shui index predictions are to be believed, residential property prices will break records as "earth-related products" are set for a good year.

The Credit Lyonnais predictions began as little more than a lark but have established an astonishingly good track record for predicting market movements according to ancient Chinese principles of geomancy. However not all fung shui masters agree with those employed by the Credit Lyonnais brokerage.

Choi Park-lai, one of Hong Kong's most famous masters, takes an opposite view, saying that the elements for the coming year are not good for property projects built from the ground, or in other words the new developments which traditionally drive the market.

Away from geomancy, the number-crunchers in most broking houses are looking forward to a reasonably good year, with the most optimistic predicting that the blue-chip Hang Seng Index will rise to over 16,500 points, against the 13,404 close at the end of the Year of the Rat. A more general consensus has the market moving up towards 14,500 points.

However, the investment fund manager Marc Faber, known as "Dr Doom", would not be surprised if the market dips below 10,000 points.

China resumes sovereignty over Hong Kong in July and is seemingly determined to see the new era ushered in with a healthy stock market. Last year a senior Chinese official was quoted as saying that the Peking government would intervene in the market if it saw prices falling substantially. There has been some back-tracking on this pledge since then.

Direct government intervention in the market is unknown in Hong Kong, although there have been instances of government pressure to move interest rates and the government was forced to bail out the futures market after the 1987 crash.

There is no underlying reason to expect such action will be necessary in the coming year. China-related stocks, alongside the property and banking sectors, are high on the buy lists pumped out by local analysts.

The problem for the market is far more likely to reside in Wall Street where a big correction may still be pending and further interest rate rises have not been ruled out. The Hong Kong market sticks tenaciously close to Wall Street.

Nevertheless the Year of the Ox is a historic year for Hong Kong and many of the biggest players also serve as the most influential advisers to the incoming Chinese administration. They have been talking up the territory's prospects and assuring their new patrons that they will do their bit to give a fair wind to the new regime.