The good, the bad and the superstitious

The new cycle will bode well for companies in the technology, AI, metaverse, energy and medicine sectors, all of which are under the “fire” element, says Ken Koh, fengshui master from House of Fengshui and partner for Maybank’s fengshui guide to prosperity this year. 

The new cycle will also favour companies within the “earth” industries such as construction, mining, data, real estate and mergers and acquisitions, Koh adds.

Fengshui is a traditional Chinese practice that involves making arrangements to ensure the flow of positive energy or “qi”. While investors may rely on the principles of fundamental and technical analyses when it comes to picking stocks, it will not hurt to rely on fengshui for a second opinion when evaluating stocks for their investment portfolio.

Maybank’s fengshui guide was first published in 2022 when the team came across fengshui principles on improving luck at the workplace by rearranging furniture. “This then took the form of publishing a fengshui guide to help investors find their own luck,” says Thilan Wickramasinghe, head of research, Singapore, at Maybank Investment Banking Group.

See also: Headline inflation eases to 1.4% on y-o-y basis in October; core inflation declines to 2.1%

“Fire” is a symbol of economic activity, confidence and optimism, says Koh, while the industries with the “earth” element include real estate, data storage facilities, human resources, as well as crop production, urban farming, plant-based food recycling and home-based businesses.

During this cycle, the south is a good location, while Gen Z will be the people in charge.

Sector winners in each element

See also: Economists lift their 2024 GDP growth forecasts following positive 3Q2024 GDP growth

Among the five elements, “metal” stocks, or companies in metal industries will do well, thanks to the “wood” element in the Year of the Wood Dragon. The element is said to bring prosperity to companies in these sectors, says Koh.

According to Koh, 2024 is a unique year, as it is characterised by the masculine Yang energies. “This is due to the Yang ‘wood’ controlling the Yang ‘earth’, which is a conflicting pair of elements that signify control, pride, and territorial dominance,” he says.

The world headed into the Year of the Wood Dragon on Feb 4, before the first day of the Lunar New Year on Feb 10, says Koh. While some believe that the transition to the new zodiac before the new year could bring about bad luck due to the lack of spring, Koh begs to differ.

Still within the metal sector, he sees that the Yang “metal” element will benefit the banking, engineering, mining, automotive (including electric and high-end vehicles), private jets, hardware, and military equipment sectors. At the same time, the Yin “metal” element will benefit beauty products and services, cosmetic treatments, jewellery, luxury brands, luxury watches, and minting.

“This year presents a great investment opportunity for those who are ready to pick up fair values. The first half of the year provides the best opportunities for those who wish to benefit from the upcoming economic rebound, which can take up to five years to fully realise,” says Koh.

Sector winners within the “metal” element are banking, mining, engineering, automotive and luxury.

Meanwhile, stocks in “earth” industries should see a continued rise in support due to easing interest rates, inflation and good fiscal management.

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In addition, the new 20-year cycle, which will see the rise of “fire” energies, could provide support to “earth” industries to evolve into sustainable businesses. Such businesses could also contribute to society with the better use of tech and AI.

“Physical possession will plateau in around 10 years from now, transitioning into transient ownership, paving the way for a new generation of exponential growth,” says Koh.

Sector winners within the “earth” element are waste management, real estate, data warehouse and urban farming.

Companies within “fire” industries such as stocks, insurance, chemicals, entertainment and event management will see a shine back into business sentiments due to interest from June onwards, after a moderate economy in the first half of the year.

“As a result, the stock market and equities will see a wave of hope and confidence, leading to mergers, acquisitions and IPOs [then],” says Koh.

“Technology, medicine, entertainment and travel will do well from the start of the year, and the upside will continue to be positive. Insurance will be a star performer,” he adds. 

“However, being the first year into a new period of energy always means changes and painful transitions. Therefore, we can expect new exciting entrants and fallout of players in the ‘fire’ element businesses,” he continues. 

“It’s important to bear in mind that the demand driven by Gen Z must also deal with sharing economies, fleeting ownership and very fluid exchanges.”

Sector winners under “fire” are insurance, life sciences, technology and entertainment.

“Water” industries, which include airlines, cruise operators, accommodation providers and theme parks may not be talked about much, but they will remain profitable, predicts Koh.

Despite the challenges due to changing consumer demands, the fengshui master sees that businesses related to hospitality, travel and lifestyle will continue to thrive throughout the year.

Meanwhile, small, standalone retailers may struggle to compete and many may not survive in 2024. This is in contrast to physical stores by large corporations, which can “spread their profits”. Online retailers may also do well due to their mass appeal and traffic. In the same vein, this will benefit logistics companies that fall under the same category too.

Despite the spiritual aspect, Koh is practical, too. Referring to the “problematic shipping lanes” such as the Houthi attacks on the Suez Canal and the low water levels at the Panama Canal, he foresees that the shipping industry may face “some difficulties”.

However, the “water” industry will remain profitable as it can adapt to different conditions, says Koh. 

“The strong ‘fire’ element in this year’s chart also indicates financial profits for water industry players. Marine fisheries and aquaculture farming will see an increase in productivity and production to meet worldwide demands, which will add to their bottom line. Water desalination and filtration will also become more important,” he adds.

Within the element, sector winners are those in the airline industry, cruise operators, theme parks and e-commerce.

Finally, companies within the “wood” element can expect difficulties in the second half of the year. Furthermore, those looking for prospects must have the “necessary resources” to reach their goals.

“Wood” businesses, which refer to companies in education and fund management, will make an effort to establish their presence. However, they may struggle due to the strong influence of “fire”, “metal” and “earth” elements.

“This will result in a lot of work, competition, and resource drain. Industries such as education, new economies, fund management, and family offices will be the most successful,” Koh says.

“Performance is key in the ‘wood’ industry, which is related to the ‘fire’ element. Therefore, businesses in this industry should focus on sharing experiences, knowledge transparency, intense teachings, transient ownership, optimism, branding, personal image, spiritualism, religion, and delivering quick results,” he adds.

Sector winners here are education, fund management and family offices.

CLSA’s predictions

Hong Kong-based brokerage CLSA concurs, believing that “earth”-related industries should continue to perform well in the new 20-year cycle because “fire produces earth”, says “sorcerer” James Greenbaum in CLSA’s annual Feng Shui Index. Greenbaum is aided by his team including his “sorcerer’s apprentice” Stella Liu and “wand bearer” Justin Chan. 

CLSA’s predictions first began in 1992 as a Chinese New Year card for its clients. The “light-hearted”, “tongue-in-cheek” outlook for the Hong Kong market is a well-loved tradition.

However, Greenbaum believes that companies under the “metal” element should encounter difficulties as “fire melts metal”. “Water”-related industries, similarly, may face obstacles, simply because “water can overcome fire”. Meanwhile, as wood fuels fire, “wood”-related businesses should remain stable or even experience growth.

In 2024 specifically, “wood”-related industries may see more activity although it may be in want of support from the “water” element within the bazi.

“Late summer floods, however, could lead to a rise in the ‘wood’ sectors later in the year. Publishers and paper manufacturers may continue to deny the long-predicted paperless world. Arts will flourish again after several quiet years — from painters to musicals, the forecast is encouraging,” says the CLSA team. The analysts’ rating for “wood”-related stocks is “good”.

Companies in “fire”-related industries such as tech, medicine, chemistry and even religion should expect advancements due to the “fire” element’s “favourable position”. The element could manifest itself most during the summer and show an “unusual amount of strength” throughout the winter, likely due to the lack of “water” in the chart. According to the CLSA team, this sector is in a “good” place this year.

Companies in “earth”-related industries may remain stable while livestock and appraisers may flourish in 2024.

“Despite unseasonable bursts of fire activity, earth may remain the consistently flourishing element through 2024. Fire might even help strengthen earth, which is already naturally strong in the bazi, tempered only by the decent amount of wood that can use earth’s power for its own purposes,” says the CLSA team, who have rated the sector as “great”.

Companies within the “metal” industry such as banks, vehicles and heavy machinery are expected to be “mediocre” as the element is in “relatively short supply” outside of its usual period of strength at the end of the summer. The element does not seem to feature strongly in the bazi either, says the CLSA team.

That said, the Hang Seng Rooster, when combined with the Dragon, can create “metal”, which may mean that progress could take several steps instead of a straight path for “metal”-related sectors.

“Water”, which is the weakest of all five elements, has a “warning” rating from the CLSA team, with “water”-related businesses likely to remain busy but with thin margins.

“Due to unseasonable summer activity, ‘water’-related industries like frozen food and investigative journalism may be drawn to disaster-relief efforts. Late summer and autumn may be bright spots for travel and transport,” says the CLSA team.

Analysts’ predictions

The Singapore market saw a “tough” start in January as it underperformed by 2.7% during the month. The weakest sectors were electronics and commodities while transportation and shipping outperformed, notes the team at PhillipCapital in its Feb 2 strategy report.

“Headline economic news was favourable with Singapore’s GDP expanding at a faster pace of 2.8% y-o-y in 4Q2023. But most indicators remain sluggish,” it adds. 

In December, Singapore’s manufacturing and export indicators fell by 3.1% and 1.5% y-o-y respectively while the REITs sector saw “operationally healthy” results although interest expenses and foreign currencies were a drag to dividends. About two-thirds of the REITs saw a decline in their distributions per unit, with China being the weak spot. Negative rental reversions or arrears crept up for REITs with portfolios in the country.

However, the team remains positive on REITs as it expects rate cuts from the US Federal Reserve to happen this year. While the Fed kept rates steady in their latest meeting, Fed chair Jerome Powell said in an interview that he still expects the Fed’s benchmark lending rate to reach 4.6% by the end of the year, according to policymakers’ median estimate.

In telecommunications, Singtel is still the team’s top pick. Bruising mobile pricing battles in its various regional markets have subsided; it is planning $600 million in cost cuts and is on track to divest some $4 billion worth of assets and recycle the capital for new growth such as data centres with partners such as Nvidia, or reward shareholders with more dividends.

The Indosuez Wealth Management team believes that the global economy — especially the US — will see a soft landing. However, despite the anticipated slowdown in the coming months for the US, analysts Gregory Steiner and Adrien Roure do not see a recession happening.

“We believe the economic dynamics in the Euro area are more vulnerable, although an improvement in household purchasing power will be a positive catalyst for 2024. Emerging countries will continue to drive global growth once again this year,” they write.

The disinflation process is also expected to continue in the coming quarters but with some volatility expected in the short term. That said, the analysts still see upside risks given the persistent inflationary pressures in services and any potential impact from the current happenings in the Red Sea.

On central banks, the team believes that the market’s rate cut expectations for the Fed and the European Central Bank (ECB) are overly aggressive. However, they believe that the ECB’s cuts could be more in sync with the Fed’s.

“Like the latter, the European institution is thus expected to begin its rate cut cycle during the second quarter. We expect approximately 100 basis points of rate cuts on both sides of the Atlantic in 2024,” says the team.

All is not rosy, however, with the team seeing potential risks such as the debt problems in Europe and the US back in the spotlight “after several years of fiscal profligacy”.

“On the political front, a record proportion of the global population will go to the polls this year, which is likely to increase market volatility in the short term (with the US presidential election topping the list). Lastly, we will be closely monitoring the global geopolitical situation as the number of conflicts rises,” it adds.

LGT’s chief investment strategist Stefan Hofer sees “some exciting themes” in the healthcare sector with weight loss drugs booming and generating huge profits.

“There are pockets of healthcare which are very exciting but generally speaking, healthcare is more defensive, less profit growth than tech. but in a world where growth slows down, healthcare tends to be good insurance, help investors in their portfolios,” he says.

Here are the stocks recommended by The Edge Singapore team this year.