Last week, millions of people around the world were busy preparing for one of the year’s biggest festivals – Chinese New Year. This celebration marks the first new moon of the lunar calendar, and with this, the 2024 “Wood Dragon” year came into effect.
The Chinese New Year determines a specific animal and element associated with a particular year. The Year of the Wood Dragon is believed to promote growth, progress and prosperity, and a year to start something new with long-term potential. The stock market in China may need more of that – so far this year, MSCI’s China A index has fallen more than 10% in the last month which has dragged down MSCI’s index overall.
The MSCI China A Index captures Large and Mid-cap representation across China securities listed on the Shanghai and Shenzhen Exchanges. The index covers the securities that are accessible through “Stock Connect”.
Historically, U.S. equities have done “particularly well” during the Dragon years since 1871, gaining an average of 12.7% for the year. This is according to Tom Lee, head of research at Fundstrat Global Advisors in an interview with MarketWatch last week. Lee suggests that the S&P 500 SPX could rise as high as 5,350 points by the end of 2024, implying a 6.4% advance from its closing level of 5,026.61 points last Friday on the 9th of February.
Alongside the auspicious nature of the Dragon Year in the securities market according to Tom Lee, the Dragon also holds a revered status as one of the most favourable zodiac signs among many Chinese individuals, potentially contributing to a baby boom in Asia. According to widespread belief, the Dragon holds a revered status as one of the most favourable zodiac signs among many Chinese individuals. Individuals born in Dragon Years are thought to inherit exceptional qualities that influence their lives profoundly. These qualities include intelligence, charisma, eloquence, and even the potential for wealth according to the South China Morning Post.
Consistently, the Year of the Dragon is associated with a surge in childbirth rates within the 12-year Chinese calendrical cycle. Notably, in 2000 and 2012, both Hong Kong and mainland China experienced substantial increases in birth rates during the Dragon Years.
In Chinese culture, gold symbolizes auspiciousness and is frequently exchanged as a gift during this celebration. The Year of the Dragon traditionally sets off a notable uptick in demand for gold, propelling prices for bullion and gold-related products to heightened levels.
Following the closure of the Chinese markets and several others markets during the Chinese New Year, the region experienced subdued activity throughout the week. Investors diverted their attention to key economic indicators elsewhere amid the lull. Today, however, Asian stock markets are showing signs of optimism. The Hang Seng in Hong Kong has surged by 2.8%, while Japan’s Nikkei has climbed by 0.9%. The Nikkei 225 is now nearing its all-time high of 38,957.
In conclusion, the Chinese New Year of 2024, by the favourable “Wood Dragon,” carries profound significance beyond cultural festivities. As we delve into this new lunar cycle, characterized by growth, progress, and prosperity, it is evident that its impact can extend far beyond its traditional customs.
As Asian markets display a resurgence of optimism, marking a shift from the subdued activity witnessed during the festive week, we anticipate the unfolding of new opportunities and challenges in the global economic sphere. The resilience and adaptability demonstrated amidst recent fluctuations serve as a testament to the enduring spirit of progress and renewal that defines the essence of the Wood Dragon year.
The commencement of the Year of the Wood Dragon amidst the festivities of the Chinese New Year sets the stage for a year characterized by growth, prosperity, and new opportunities, with global markets poised to navigate the ensuing developments and economic indicators shaping investor sentiment in the months ahead.
References:
Bloomberg. (2024, February 7). China’s New Year Buyers Look to Gold (XAU) as Stocks and Property Crash. Bloomberg.
MarketWatch. (2024, February 15). Lunar New Year 2024: What history says about the stock market and gold in the Year of the Dragon. MarketWatch.
MSCI. (n.d.). MSCI China Index (USD)
SCMP. (2024, February 9). Year of the Dragon 2024: Predictions, Personalities, and Wood Elements Meaning for the Next Lunar New Year. South China Morning Post.
Read more about our market entry services or our wider advisory & strategy expertise.
Receive our latest market insights, news and reports, and business bulletins.
