February 12-18, 2018
By DAVID HO in Hong Kong
For China Daily Asia Weekly
The recent global share market plunge may not have been the best ending to the Year of the Fire Rooster. But as one door closes, another opens.
The Year of the Dog that starts on Feb 16 is powered by the earth element in its Yang energy form. According to astrologers, the Yang Earth is represented by a massive mountain. Just like a mountain, it can be difficult to scale and overcome but is also stable and unmoving.
As the new Year of the Dog begins, the question undoubtedly is: What will it bring? Will it be a “paw-sitive” period or are there “ruff” times ahead?
The recently released CLSA Feng Shui Index cautions investors to not bite off more than they can chew, and tips that banking and financial stocks will underperform. So market punters looking for value should sniff around a bit longer before making a move.
But everyone celebrating the new lunar new year is likely already to be on the go. With the arrival of the Spring Festival comes the world’s largest migration wave, known as chun yun (spring move), which sees hundreds of millions in transit.
To put things into perspective, that is some 2.5 billion trips by land, 356 million by rail, 58 million by plane and 43 million by sea.
Chinese New Year, or Spring Festival, is easily the biggest celebration in East Asia. It is a long-held tradition for the Chinese to reunite with their loved ones during this annual event.
In China the concept of loved ones has encompassed more than just family and friends during the last few years. And with this being the Year of the Dog, we are likely to see furry buddies lavished with even more love and attention.
Taking note of the trend, Hainan Airlines recently allowed pets to join their owners on flights.
People are spending more on their pets than ever before. The size of the industry that is rapidly evolving around pooches is no longer reminiscent of a tiny Chihuahua — it is more like a giant Tibetan Mastiff. Soon we will be adding the numbers of traveling pets to the chun yun head count.
As we enter the Year of the Dog, the focus on these four-legged companions has intensified.
From Gucci’s latest collection of 63 canine-themed items, to limited-edition timepieces from Panerai, Vacheron Constantin and Chopard, it seems luxury brands expect consumers to drop serious dough on anything dog-related in 2018.
China has already been shelling out a lot on man’s best friend in recent years. Market research firm Daxue Consulting estimates the pet care sector in China was worth 134 billion yuan ($21.2 billion) in 2017. This marks an almost 10 percent increase from 2016.
The National Bureau of Statistics ranked China as third in the world for dog ownership, with 27.4 million pet dogs in 2016. It is behind only the United States and Brazil, which boast 55.3 million and 35.7 million dogs respectively.
Despite the large numbers, only about 8 percent of Chinese households in first-tier and second-tier cities have pets, according to Daxue. This suggests great potential for growth.
This is also a rapid rise, considering that it was only in 2003 that all Beijing residents were allowed to own dogs.
Min Chun, a senior project leader at Daxue, believes the actual numbers may be bigger as many dog owners fail to register their pooches with the authorities. He said that places like Shanghai are making more of an effort to get owners to register them now.
Pet ownership is also linked to a growing aging population. It is no coincidence that China and Japan, with the highest aging population rates in Asia, are two countries that also boast the highest rates of pet dog and cat ownership in the region.
“With the silver tsunami increasing, it is likely pet ownership will rise too. But it’s not just the elderly that are adopting furry companions for comfort and companionship,” said Chun.
Many households are also the product of China’s long-held former one-child policy and are keen to add an animal member, particularly affluent households.
Chun said owners in the mainland spend an average of 100 to 500 yuan a month on their dogs. About 38 percent of that spending goes toward pet food.
A forecast from Euromonitor expects dog food sales to hit $760 million by 2019.
According to a report by marketing firm GfK, Chinese pet owners have their sights set on premium pet food products. In 2015, about a fifth of the pet food sold in China was of the more upscale and organic variety with no synthetic ingredients.
The reasons for this lavish spending on pets are as varied as the brands that are available.
“As we are now seeing pets regarded as family members, even in Africa and other early-stage markets, we only use ingredients that are also cleared for human consumption,” said Andrea Terrile, export manager for Agras Pet Foods, an Italian company that deals with premium pet food.
“Developing countries are very much our key expansion markets, with China our priority. We made our first inroads into the mainland market four years ago,” he said.
Chun from Daxue explained: “People are becoming more health conscious and are wary of the reputation of domestic produce. China’s working dogs in the military and police force are also a driving force in that (trend), as they require good nutrition in order to work well.
“That is why more and more are turning toward premium pet food from abroad for their pets. They are mainly looking for products made from top-grade ingredients like beef, chicken, grain, corn.”
But Chun said domestic brands in the sector, like Shanghai-based Nature Bridge, are rising to meet that need and posing competition for overseas brands.
According to the National Bureau of Statistics, the nation’s domestic pet food production reached 1 million tons last year compared to 700,000 tons in 2015. A rise in production is expected as more companies enter the market and expand their production capacity with new technology.
Other sectors are eager to help Chinese consumers pamper their pooches too, especially luxury brands. Coach, famed for its expensive designer handbags, had previously launched an entire collection of designer collars for dogs.
Chrome Bones, a US company that set up a franchise in Shanghai in 2014, has released Swarovski crystal encrusted pet collars and leather carriers that come with price tags well above $200. And they have been reporting steady sales in the country ahead of the Year of the Dog.
Well-heeled owners are also keen to show off their decorated doggies when they travel, and the number of such initiatives has been increasing in the lead-up to the lunar new year.
Referring to Hainan Airlines’ decision to allow pets to travel on domestic flights, Chun said each passenger is allowed to book two seats for two pets for a cost of around 800 yuan.
“That’s not all, though. A report by online travel agency Qunar reports that there are only 300 hotels in the country that are pet friendly, most of them being the big and established luxury hotels. That represents only 0.1 percent of the hotel industry in China,” he added.
If trade shows are an indication of interest, then Pet Fair Asia would be a prime example. The expo event moved from Hong Kong to Shanghai in 2011 due to the growing size of the mainland market.
It now takes place across several halls at the Shanghai Exhibition Center and comes with long lines of people ranging from pet owners to product suppliers.
That demand has also launched businesses in the digital realm. Wan Xiao Ban (Little Playmate in Chinese) is an app that acts as both a social media platform and concierge service to link pet owners to pet friendly businesses around the country.
It was launched in March 2016 and already has over 30,000 followers on its WeChat account. Chun estimated that around 8,000 pet owners have used its services since it started.
State-owned companies have been finding niches in the pet industry. The People’s Insurance Company of China offers pet insurance policies, with annual premiums ranging from 450 to 3,500 yuan.
It is unlikely that Chinese people’s devotion to dogs will end anytime soon.
“Pet ownership, of dogs in particular, is only going to rise and so will the industries that support it,” said Chun.
“The Year of the Dog might even be a boost for that. That should make it a great year for all those in the pet industry and beyond.”
Leaping through the past From media advances and record oil prices to new trade pacts and robust growth, dog years definitely do not lack bite
February 12-18, 2018
By DAVID HO in Hong Kong
For China Daily Asia Weekly
Dog years have proven to be particularly significant for modern media — from China’s first TV broadcast and first Internet connection, to the establishment of China Unicom and the China Central Television CCTV New Year’s Gala program.
And this imminent Year of the Dog promises to be one for the books.
Coming off a year of economic growth that exceeded expectations and stronger bonds with neighboring countries due to the rapidly growing Belt and Road Initiative — the drive to improve connectivity along the historical Silk Road trading routes — China is entering a year of great opportunity and not a few challenges.
A look at past years of the dog — the 11th animal in the Chinese zodiac — provides a glimpse of what may be in store for the Year of the Earth Dog, which begins on Feb 16 and ends on Feb 4, 2019.
The Year of the Fire Dog in 2006 was definitely a hot one. China experienced its warmest year on record since 1951, though new highs have been set since. The country was faced with a series of deadly natural disasters that took the lives of 3,186 people.
New connections in Southwest China’s Tibet autonomous region were a theme in 2006. Tibet became the final province-level entity in China to be linked to the rest of the country through a conventional railway with the trial run of the Qinghai-Tibet Railway, one of the great modern works of transport engineering.
Internationally, China also made great strides in establishing new connections. The China-Chile Free Trade Agreement came into force in October 2006. This too was the year that the China-Pakistan Free Trade Agreement was first negotiated.
The year also marked the launch of an official study on a China-Republic of Korea Free Trade Area.
The interest to trade more with China came as the country’s economy grew by 10.7 percent in 2006, the fastest pace in more than a decade even amid growing signs of inflation.
On the digital front, Baidu Baike was launched. This is China’s own collaborative cyber-encyclopedia.
After a difficult period, global stock markets staged a huge rebound toward the end of the year. This was led by the Dow Jones Industrial Average which topped the 12,000 mark for the first time.
Average oil prices also hit historic highs, with West Texas Intermediate averaging around $66 per barrel for the year, part of a climb that would only end with the global financial crisis two years later.
The Year of the Wood Dog began in February of 1994, much like the Year of the Earth Dog 2018.
The year marked the beginnings of digital China, as the country established its first online connection and officially joined the Internet. That was the result of a joint effort between the Institute of High Energy Physics in Beijing and Stanford University’s Stanford Linear Accelerator Center.
It was aimed at improving communications between physicists in China and the United States, who were working collaboratively on the Beijing Electron Spectrometer, a type of particle accelerator.
Another major player on the cyber frontier, China Unicom, was established in 1994. The State-owned mobile service provider is currently the world’s fourth largest by subscriber base.
This was also the year that relations warmed between Russia and China, as both agreed to de-target their nuclear weapons against each other.
Construction began on the Three Gorges Dam that spans the Yangtze River. Operations at the high-profile project began in 2012. It is the world’s largest power station in terms of installed capacity at 22,500 megawatts and is considered a monumental landmark in Chinese economic history. The dam generated a record-breaking 98.8 terawatt-hours of energy in 2014.
China made a splash in the Year of the Water Dog 1982 when it announced to the world its population had exceeded 1 billion. The report made by the National Bureau of Statistics put China’s population at around 1,000,868,900 in mid-1982, which made it the first country to top the billion mark.
This year was also when the People’s Republic of China adopted its current Constitution.
The first ever CCTV New Year’s Gala program was held, marking the beginning of an annual tradition that has spread across the country. The popular annual program is now watched by around 1.1 billion viewers every year.
More significantly, the last of the Three Joint Communiques arrived in 1982 following those in 1972 and 1979. The collection of joint statements by the US and Chinese governments reaffirmed ties between the two countries and played a crucial role in improving relations. It continues to be a guiding element in discussions between the two superpowers.
The Chinese economy also put on a strong performance during the year, growing at 9 percent amid one of the most prolonged periods of economic expansion in history.
The Year of the Metal Dog 1970 saw some exciting adventures in space. While the US’ Apollo 13 landed safely back on Earth after an aborted lunar landing, China launched its first satellite (Dong Fang Hong 1) into orbit using a Long March-1 Rocket (CZ-1).
This was also the year that Canada and the People’s Republic of China established diplomatic relations. Then prime minister Pierre Trudeau was one of the first Western leaders to recognize the People’s Republic of China. His son, current Prime Minister Justin Trudeau, was in China recently to discuss trade as the Canadian government mulls a ‘progressive trade agenda’ and a push to improve bilateral relations with China.
The last time the Year of the Earth Dog came around was in 1958. The year marked the beginning of the European Economic Community, which sought to bring about stronger economic integration in the European region. The organization would later be absorbed into the European Union, formed in 1993.
The year was also significant for China as it brought about its first television broadcasts. September saw the launch of Beijing Television Station, a predecessor of the modern-day CCTV.
Today, Chinese television continues to grow nationally and internationally, with increasing presence abroad. CCTV-4, the station’s international channel, signed a strategic cooperation agreement with Internet giant APUS Group in May last year. The move is aimed at bringing more of CCTV’s programs to a global audience.
The year also saw the beginning of the Four Pests Campaign in China to eliminate rats, flies, mosquitoes and sparrows.
The Year of the Dog 1946 was a fairly significant one for the world, coming on the heels of the end of World War II just a few months earlier.
A year of transition, it was marked by the end of the League of Nations and the beginning of operations of the United Nations. The formal founding of the People’s Republic of China in 1949 would see the emergence of a key participant into this new world body.
Back then, China’s factories were recovering from the effects of WWII, operating at 20 percent capacity and around one-fourth of pre-war output.
Also, the Shanghai Stock Exchange resumed operations, after closing in 1941 due to the war.
Earth Dog promises thrills and spills Annual tongue-in-cheek index sees HK stocks ending higher but warns investors to be prudent in the summer months
February 12-18, 2018
By DAVID HO and ELISE MAK
in Hong Kong
For China Daily Asia Weekly
As the Fire Rooster makes his last crow, the enthusiastic Earth Dog is ready to jump out of its kennel, driving the bird back into the barn.
The immediate result is likely to be a skyrocketing of the Hang Seng Index (HSI), but after that, the loyal canine might stumble in March, which could lead the index down.
And it is reasonable to expect the market to chase its tail through the summer, much like an overexcited dog, and eventually drop. However, the dog and the HSI — an Earth Rooster, since it was launched on Nov 24, 1969 — are then likely to start playing nice and get back on track.
Or at least that is what the latest CLSA Feng Shui Index predicts. The 24th edition of this tongue-in-cheek annual publication from investment group CLSA looks at what is in store for investors and the HSI in the Year of the Dog, as the 2018 Chinese New Year begins on Feb 16.
Of course, around the time the report was released, market watchers saw Hong Kong stocks slide early this month — ahead of the lunar new year — following steep losses on Wall Street.
“The dog represents duty and loyalty, defense and protection. 2018 is not a year to be aggressive, and we suggest investors to be more prudent and think twice before making investment decisions,” said Alec So, the divining team’s ‘wand bearer’ and an associate in the Chinese mainland and Hong Kong equity strategy research team at CLSA.
The team compared the bazi (eight characters) chart for the Earth Dog to the HSI’s chart. CLSA then assessed the wu xing (five energies) and its interaction with the xuan kong (flying stars). It blended them all together and added a gratuitous garnish of its own divining before serving up predictions.
Based on the magical formula, So believes the HSI will show a high-low-high performance trend overall.
“For our Hang Seng Index forecast, it will be a great start in Q1. In the summer, the Hang Seng Index will likely dip and investors have to be prudent, and the index will likely rally in Q3 and Q4. Over the whole year we expect the Hang Seng Index to record a positive performance,” So said.
“The four-six star enters the Year of the Earth Dog and the star is of the wood element. In Q1 there’s a lot of wood element, so the Hang Seng Index will be positive. Feb 28 will be an especially auspicious day. But as we enter Q2, the fire element is strong and fire melts gold, so we expect the index to dip until July,” he added.
So said the fire element will mitigate in Q3, creating great opportunities for investors in July and August.
“And in Q4 we see the water element that generates wood. As wood is important this year, we believe the HSI will have a good showing.”
Based on CLSA’s divination, the HSI is sure to finish higher than it begins. But not before a summer of discontent in some quarters.
When it comes to property, Hong Kong, the world’s most expensive property market, was also given the once-over by CLSA from a geomancy perspective.
“We divided the map of Hong Kong into nine grids to see what stars are going to sit in each of these grids,” said Sally Chan, ‘sorcerer’s apprentice’ and an equity research associate at CLSA.
“We really like the central part of Hong Kong as we see the nine star sitting right there, and it’s a very good star to have. We are talking about areas like Tsim Sha Tsui, Hung Hom and Mong Kok. To get the most benefits in these areas, make sure your home has very good airflow. So invest in a good fan and air-con,” she added.
But as with any predictions, it is not all good news.
“Regions we don’t like much are the west and the north. For those who live in the north, you need to start stocking up on gold and copper to help you mitigate some negative elements,” Chan advised.
“For those in the west, you may want to stock up on some sharp crystals.”
CLSA is also eager to see what is in the stars for those seeking love. It sees romance in the air for those born in the years of the Rat, Pig and Snake in particular.
Somewhat ominously, it advises Ox and Dragon folk to take care and guard against negative energy. But fear not, for Chan knows the right spot to see those sparks fly.
“The Single White Star sits in the northwest. That star is also called the love star, bringing positive energy to your relationships,” Chan said.
The guide also includes top sector picks, Hong Kong property tips and zodiac predictions for health, wealth, love and careers in the Year of the Earth Dog. From a feng shui perspective, CLSA’s top picks are the pharmaceuticals and consumer markets.
“They are both the wood element and wood sector. The wood sector should have a good performance this year,” said So.
“There’s a lot of wood element in the bazi chart of the Year of the Earth Dog, actually not a lot of metal or water,” said Chan. “We take into consideration the interaction of the five elements,” she added.
So expects that several fire/electricity-related industries could burn brightly in 2018.
“We believe the fire sector will also have a great year, which includes telecom, Internet, technology and utilities. However, we see a lack of metal element this year, so we believe those metal element stocks, including banks, financials, auto and machinery, will likely underperform from the strong performance of the last two years,” So said.
CLSA predicts casinos and transport will not get a boost until October. It also believes investors expecting decent returns from banking and financials are barking up the wrong tree this year, as these are likely to underperform compared to the previous two years.
CLSA also forecasts a visit by the God of Fortune to the already very wealthy Jeff Bezos of retail giant Amazon. No word yet, though, on whether it will be the same for his Chinese counterpart, Jack Ma of Alibaba.