According to the Chinese zodiac, investors can look forward to a great year for Asia’s and Singapore’s stock markets. Based on past results – although admittedly the sample size is small – the year of the rooster is one of the best years for the region’s market performance.
We looked at the performance of Singapore’s Straits Times Index (STI) since 1975, and of the MSCI Asia ex Japan index (since 1988) to see the relationship between the animals of the Chinese zodiac, and stock market returns.
Since the Chinese zodiac moves in 12-year cycles, this means that the STI performance figures have yet to complete four 12-year cycles. And the MSCI Asia ex Japan Index’s performance numbers are still working through their third cycle. This means any results are based on a pretty small sample size for both markets.
However, even with this limited sample size, some years of the Chinese zodiac are already proving to be better for markets than others.
The STI and the Year of the Rooster
As shown below, Singapore’s STI has averaged an annual return of 21 percent during previous years of the rooster. That’s 10 percentage points higher than its average return of 11 percent since 1975. (All returns are total returns and include dividends.)
That’s not the best year, but it is in the top four. The only years with better performance have been the year of the tiger, rabbit and monkey (which was last year).
Asian markets and the Year of the Rooster
The MSCI Asia ex Japan Index reflects the performance of major Asian markets excluding Japan’s. As the table above shows, the year of the rooster has been the best year for these markets, by far.
Past years of the rooster have averaged returns of 52 percent for the index. That’s 19 percentage points higher than the next closest animal, the rabbit. And it’s well above the index’s average return of 13 percent a year.
Keep in mind that Asian markets had a great year in 1993, with the MSCI Asia ex Japan Index returning 75 percent (the same with 1999, a year of the rabbit). That was an early year of the “discovery” of emerging Asian markets and these markets went through the roof. So that does skew the results.
The MSCI Asia ex Japan Index’s performance during the year of the rooster only has a sample size of two – 1993 (up 75 percent) and 2005 (up 29 percent). So, take these results with heaps of salt.
The year to avoid
For both the STI and the MSCI Asia ex Japan Index, the year of the rat is the one to avoid. Average returns for the year of the rat have been negative 26 percent for the STI and negative 25 percent for the MSCI Asia index. Those are terrible results.
The next year of the rat will be 2020. So… mark that date on your investing calendar.
Of course there’s no scientific basis for the predictive powers of the Chinese zodiac. And as time goes on and the sample size for Asian markets grows, these results could change.
The past has no bearing on the present. But historical indicators like this can give investors some guidance about what markets have done before.
And to learn about our best ideas on where to invest in Asia and the rest of the world, regardless of what the Chinese zodiac says, please click here.