Seasonality trades in Hang Seng Index (HSI) & Dollar Index (DXY)

Years ago when Asianmacro was about to graduate from university, he did well at interviews (or perhaps sufficiently lucky enough) to secure a position with a top Wall Street investment bank as a trader even before graduation.  But thoughts of pursuing a PhD & even becoming a professor did cross my mind.  However, the thought of forever needing to prove that your thesis & research is ‘right’ empirically or scientifically is way too much use of whatever brain-cells that was left in me … so Wall Street here I come more than 20 years ago!

Unlike Strategists, Economists, Analysts & other spin-masters from investment banks’, brokerages or asset management firms that can usually throw tonnes of information & justifications on why you need to buy, sell or hold … whatever that they want you to believe in; Asianmacro does not want to nor need to.  It’s my money that I am risking & I can believe in the brevity of thought, analysis, decision & execution.  Detailed & overly myopic empirical or scientific proof reminiscent of what a professor or PhD candidate needs to do might more often than not cloud the view of the forest from the trees.

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Looking at the above heatmaps for Hang Seng Index (HSI) & the Dollar Index (DXY), you cannot help but notice that statistically speaking, HSI has fallen while DXY has risen in May over the last 10 years more often than not by a considerable margin.

Is it the ‘Sell in May & Go Away’ catalyst for risky assets at play … or is it something else? It’s really too much use of my brain-cells and perhaps just a sufficient bet in short HSI (which I did on the break of 22,000 for May14 futures) and DXY June14 futures now at 79.15 (from 79.20 to 78.90) that gives you participation if this seasonality happens again but without breaking the bank & your sleep if it does not.

Bird Flu .. better be worried … How can Singapore stock market be unconcerned?

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Illustration 1: Bird flu onset in Jan 2003 … Hang Seng & Straits Times Index plunge 15% to March-April 2003

Asianmacro remembered the dark days of SARS / bird flu onset circa January 2003.  That was when there was a real sense of doom that is palpable in the air,  especially in Singapore where NOBODY ever voluntarily wears a mask over one’s nose and mouth when he/she has a cold or flu (unlike in Japan or Hong Kong) … you can actually see people in that period in 2003  (if you are lucky to spot a few brave ones out doing grocery shopping!) wearing them.

From Illustration 1, both Hang Seng and Strait Times index plunged about 15% within the next 2 months.  There is a new strain of bird flu with some deaths reported in China http://uk.reuters.com/article/2013/04/05/uk-birdflu-idUKBRE93402H20130405.  Hang Seng is currently off by 600 points (approx -3%) while Straits Times is holding up very well and off only -0.10%.  Looks like there must be a lot of ‘safe haven’ flows buying into Singapore stocks holding them up according to all the brokers!

Maybe it is an opportune time to remind ourselves, firstly, Singapore is not as good a safe haven as before both from an economic, political and geographical stand point.  Secondly, when it comes to bird flu, it is different from bringing your money over from Cyprus, Luxembourg or any other tax-haven of dubious origins to Singapore as the bird flu virus do not differentiate between Hong Kong or Singapore.  In fact, Singapore as a major transportation hub and also with a great number of its residents doing business in China and its companies depending on China, it is just as exposed to Hong Kong to such an exogenous event.

As the 2003 SARS / Bird Flu impact on Singapore stocks has proven before … this time, it shall not be any different.  Anybody who claimed otherwise had better remember the last episode.  as Singapore stocks is far too high up to justify its insulation from what that is panning out whether this bird flu is going to get worse or better, you can be sure that it is not going to get any better first and China always play down negative events!

Short SIMSCI April futures at current 372 level to 360 region as this represent a good risk-reward proposition now!  *This is either a hedge against your underlying cash stocks or outright bet on a decline.

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.

Be warned ! …. the Ting Hai (丁蟹) effect may kick in

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*Saving General Yang — comes out on 4 April 2013

 

If you think that the weaker than expected China Manufacturing PMI (official figures or those of HSBC) released in Asian morning were the catalysts for the risk off move lower in Asian stocks and AUD FX …. wait till the ”Ting Hai (丁蟹) effect” kicks in if this time is no different from the past!

 

The person and event to watch is Adam Cheng Siu-chow.  Whenever Cheng’s films hit movie and TV screens, the Hang Seng index tends to collapse.  Cheng’s next movie — Saving General Yang — comes out on 4 April 2013.

 

Cheng had shows airing during the Asian financial crisis of 1998 and the tech bubble burst of 2000.  The market fell during 11 of 17 of his television shows since 1992.  It seems that the markets do worse when the series / shows are more tragic.  (*Do note that Saving General Yang is pretty gory and tragic!).

This phenomenon is called the ”Ting Hai (丁蟹) effect” http://en.wikipedia.org/wiki/Ting_Hai_effect named after one of Cheng’s characters who makes money by shorting derivatives and stocks.

 

Check out the unbelievable statistics of the market risk off downturn from Adam Cheng:

1990s

  • October 1992: The drama series Greed of Man made its debut on TVB. During the time it was broadcast, the Hong Kong’s Hang Seng Index dropped 598 to 600 points
  • November 1994: Instinct (笑看風雲) made its debut on TVB. The Heng Sang Index fell more than 2,000 points.
  • September 1996: Once Upon a Time in Shanghai (新上海灘) premiered on TVB. The Hang Seng Index fell 300 points.
  • June 1997: Cold Blood Warm Heart (天地男兒) made its debut on TVB. The Hang Seng Index accumulated 735 points in losses.
  • December 1997: Legend of Yung Ching (江湖奇俠傳) was followed by a fall of 1.4% in the Hang Seng Index.
  • June 1999, Lord of Imprisonment (神劍萬里追) was followed by a fall of 6.5% in the Hang Seng Index.

2000s

  • September 2000: A loose sequel of The Greed of ManDivine Retribution aired on ATV. Due to the Tech stock bubble at the time, the Hang Seng Index fell an accumulated 1,715 points, with other stock markets around the world falling as a result also.
  • March 2004: Blade Heart (血薦軒轅) premiered in Hong Kong, the Hang Seng Index fell 550 points over 3 days due to high oil prices and instabilities in the Middle East.
  • October 2004: The Conqueror’s Story (楚漢驕雄) premiered in Hong Kong, followed by a 198-point drop in the Heng Seng Index on the day of the premiere.
  • March 2005: The Prince’s Shadow (御用閒人) broadcast of the first episode, the Hang Seng dropped 100 points by noon, then rose back 90 points by the end of the day.
  • July 2007: Return Home (香港傳奇-榮歸) broadcast and the market to fell 1,165 points.
  • March 30, 2009: The King of Snooker (桌球天王) premiered in Hong Kong. The Heng Seng Index fell 663.17 points.

 

Asianmacro is not superstitious by nature and correlations does not infer causality. However if a sufficient number of people choose to believe in this mumbo jumbo ”Ting Hai (丁蟹) effect”, it might just become a self fulfilling prophecy and the markets de-risk and takes on a life of its own …..

 

 

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.