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How to Spend Your Lai See
THEME
Invest in calves in the year of the bull
■ The second sign of the Chinese zodiac is the bull. Bulls know they will
succeed through hard work and sustained effort, and find no truth or
benefit in concocting get-rich-quick schemes. We are devoted to
working hard in the Year of the Bull.
■ The time when David defeats Goliath is when the economy recovers.
To grow our Lai See money by investing in the stock market this year,
we should look for the winning calves (small caps), which are at their
trough valuations and, thus, more tolerant of the macro uncertainties
than the more expensive bulls (large caps).
■ In this report, we focus on eight “Lai See” small-cap picks with average
potential upside of 95%. Our Heads of China and Hong Kong Research
also share their views on the market outlook and their top picks for the
Year of the Bull.
Kung Hei Fat Choi
Invest in calves in the year of the bull
Kenny Lau, CFA, Regional Small-cap Research
Giving red packets during Chinese New Year is a tradition. “Good luck money” is wrapped
in little red envelopes called Lai See (Figure 5). The packet is usually red or gold in colour,
symbolising good luck and vitality. Legend has it that Lai See was given to children in case
the beast, which was known as Nin (the same word as “year” in Chinese), wanted to hurt
children. They could then use the money to bribe the beast.
Nowadays, Lai See is typically handed out to children and unmarried people by their
parents, grandparents, relatives, close neighbours and friends. Bosses also give Lai See
to colleagues on the first working day of the New Year for good luck in the coming year.
In many cases, people you hardly know can suddenly become your best friend and greet
you with a cheerful “Kung Hei Fat Choi, Lai See Dow Loi” (meaning: “Hey, I wish you to
make a fortune; give me some Lai See money then”). Clearly, married couples are the
losers in this Lai See-giving tradition – they have to surrender Lai See whenever anyone
qualified greets them and they cannot say no! Nevertheless, most do not mind, as usually
Lai See collectors are cheeky and cheerful.
In Asia, people are expecting to receive “smaller” Lai See this year amid the economic
challenges. It is reported that people are favouring brand-new HK$10 notes, over HK$20
notes at Hong Kong banks for Lai See this year. The Hong Kong Monetary Authority has
printed 50 mn new ten-dollar polymer notes. Together with the 75 mn notes in stock, there
will be 125 mn new HK$10 polymer notes to meet the expected surge in demand.
In anticipation of the shrinking amounts of Lai See to be received this year, what can
recipients do to preserve the value of the little polymer Lai See?
Year of the bull – a bull or calf year?
Past years of the bull were mixed
2009 is the Year of the Bull in the Chinese lunar calendar, the second sign in the Chinese
zodiac. Bulls know they will succeed through hard work and sustained effort and find no truth
or benefit in concocting get-rich-quick schemes. Pragmatic and down-to-earth, they are
motivated to work hard and have no respect for lazy or careless people. However, beneath
their unpretentious, tranquil exterior lies a heart of gold and a motivation to prosper.
2008 marked an unprecedented turbulent year for the global financial markets. 2009 has
also started as a volatile year. Is the Year of the Bull a good year to invest our Lai See
money in the stock market? There is a Chinese folk belief that the 12 Chinese horoscope
signs may have some affect on the general investment environment for the whole year.
In the past three Years of the Bull (1973, 1985 and 1997), the markets were mixed but
choppy. The Hang Seng Index (HSI) plummeted 57% in 1973, but rose 21% in 1985 (see
Figure 7 and Figure 8). The HSI lost 32% in 1997, when the Asian financial crisis unfolded
(Figure 9).
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