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For the New Year, reading the Hang Seng’s horoscope

February 3, 2011, 6:30 PM UTC

Good news, China! The Year of the Rabbit is also expected to be the Year of the Bull.

By Sheridan Prasso, contributing editor

The Chinese Year of the Rabbit, which begins Thursday, will be a good one for the roaring Hong Kong Stock Exchange’s Hang Seng Index, according to a tongue-in-cheek prediction based on Chinese astrology from Hong Kong-based investment banking firm CLSA. It will end the year up another 4% on top of its 15% run-up in the Year of the Tiger last year.

The report recommends buying during dips in the year, especially late June and September. “The year of the Metal Rabbit promises plenty of luck and material gain for investors, with many signs favoring the accumulation of indirect wealth,” it states. The report also makes a wry prediction about US Federal Reserve chairman Ben Bernanke, born Dec. 13, 1953, under the Chinese zodiac sign of the Water Snake.

“Snakes may as easily be financial wizards as smoke-and-mirrors magicians,” the CLSA report says. “Bernanke is in for a tough year, with much of the trouble coming from the East. Despite pressure to change course, compromise, consult widely and appear populist, he’ll do best to make like a deaf adder.”

“If he can keep his Hare while all about him are losing theirs, Bernanke can look back on this as one of his most rewarding years,” it continues. “Being a Water Snake suggests Bernanke is intuitive and intelligent; open to ideas, but not bunkum; and empathetic yet skeptical and astute. Against that is a difficulty in admitting error and a tendency to post facto justification.”

But never mind Washington. Things will be far rosier out in Hong Kong, where the exchange broke records for 2010, raising over $58 billion in equity for new listings. The New York Stock Exchange raised $39 billion by comparison, despite its own record of 22 Chinese companies listing in New York for the first time.

While CLSA makes no guarantees beyond the fun of making predictions, the investment firm says that its Year of the Golden Tiger predictions for 2010 were so accurate “that even we were a little surprised.” Here is its chart:

So this year, the Hang Seng will get off to a slow start in February as “the Rabbit [is] reluctant to emerge from its hole for fear the tiger still lingers,” the report notes. “March calls for patience as opposing forces test investors’ metal. As the Rabbit finds his feet, wealth will come from the West in April and prove a great month for those with stamina.”

“May begins with one of the year’s four most auspicious dates (May 14), but we expect a tumble in June, providing a great buying opportunity for the savvy,” it continues. “Investors may want to rethink their summer-vacation plans: we see markets rising sharply over July and August. Money will flow.”

For investors who miss out on the dip, CLSA predicts another sharp decline in September. “October marks a sustained market rally with money flowing abundantly through to the end of November,” it states. “However, investors should remain focused as markets decline during December. Come January 2012, the Bunny bounces back to close the year on a high.”

As for which sectors to focus on, CLSA advises: “Pay attention to the five elements: Metal is hot, water is bubbly, fire is on fire, wood would if it could, and earth is soiled.”

Translation? “It will be a great year for financials, gaming, gold, resources and transport. It will be a good year for oil and gas, technology, telecoms, Internet and utilities, but an unexciting time for the earth-related property sector.”