Chinese New Year brings some warnings on war and stock markets

Chinese growth has been stellar for the past four years and last year the Chinese stock market almost doubled.

Links with the Middle East have also been growing, if nothing else the need to secure oil and gas resources to fuel this growth is clear. Chinese demand is also one of the major factors in sustaining oil prices at near record levels

According to Chinese tradition the Boar is one of 12 animals on the 12-year cycle of the Chinese zodiac, which follows the lunar calendar, and the advice of its proponents merits the same degree of skepticism as horoscopes in the West.

'The Year of the Boar will not be very peaceful,' says Raymond Lo in his New Year's message. 'Boar years can be turbulent because they are dominated by fire and water, conflicting elements that tend to cause havoc.'

Interest rate hikes

Hong Kong's celebrity fortuneteller Peter So adds, 'Because of the water element in the Year of the Boar, the economy will continue to grow, which also paves the way for another round of interest rate hikes'.

Another Hong Kong astrologer Alion Yeo is saying North Korea will undergo a power struggle that will bring leadership changes around May. Singapore fortuneteller John Lok predicts the situation in Iraq will not settle and that President Bush will have a bad year.

But Christian Deseglise, Global Head of Emerging Markets Business at HSBC Investments, manager of $329 billion of assets worldwide says the outlook for China continues to be favorable, with valuations supported by a strong macroeconomic environment and robust earnings growth.

He remarks, '2006 was an exceptional year for China, with the equity market rising 83% in dollar terms for the year, outperforming its Brazil, Russia, and India counterparts and nearly all other emerging markets.' China has also seen four straight years of double digit GDP growth, and is still on track for growth of around 9% in 2007, says HSBC Investments.

Healthy skepticism

However, you have to wonder if the economists might not be proven wrong by the Chinese fortune tellers, who perhaps take a more skeptical view of the world than some traditional analysts.

The US stock market up cycle is approaching four years of age, and is over due for a correction which would drag global capital markets down with it. And it could be that the Chinese stock market finds out like the Middle East last year that exceptional rises can be followed by exceptional falls.

Moreover, the myriad of geopolitical instabilities around the world that might erupt into unexpected violence and wars are often side-stepped by commentators as 'wild cards', one reason why risk is priced so low at present. So the Year of the Boar might yet turn out to be as tough as predicted by the Chinese astrologers.