Enter the Dragon

Modest expansion: For this year, the economic momentum is unlikely to repeat the solid growth that was experienced in the past three Dragon years but growth will be modest at about 4.5%.

GONG Xi Fa Cai! Xin Nian Kuai Le! Today is the first day of the Lunar New Year under the fifth animal zodiac, the Dragon. This year is the 4,722nd year under the Chinese calendar and the year is a Yang year.

Just like any other year, the Year of the Dragon will have a significant influence not only on those who are born in the same animal zodiac but also on the other 11 Chinese zodiac animal signs.

In addition, there are five elements of the Chinese zodiac derived from the Five Elements Theory and they are Fire, Water, Earth, Wood, and Metal. This year is the Wood year.

The next question on everyone’s mind would be “What will be the outlook for the Year of the Wood Dragon?”

According to the website www.thechinesezodiac.org, “the Wood Dragon is the most creative and visionary of all dragons. The Year of the Dragon in 2024 is expected to be a time of visionary leaders, innovators and problem solvers.

“It is also predicted to be a great year to start new projects, explore new opportunities, and create value for all. Promising sectors for business growth in the 2024 Dragon Year are fintech, artificial intelligence (AI), cybersecurity, blockchain and solar energy.”

The website further adds that with the elements in place, it will be a good year for diplomacy and communications, bringing good luck and unexpected opportunities.

The website also cited Wood Dragon years as extremely rare as the last Wood Dragon year was 1964 and the next one is only 60 years ahead, in the year 2084. This brings a special kind of energy to all.

Interestingly, a dragon is also seen as a symbol of power, fear, protection and honour, all at the same time, which makes the dragon versatile and highly unpredictable.

Positive momentum, economically

Economic-wise, in the past, the Malaysian economy has seen respectable performances in Dragon years.

In 2012, the last year of the Dragon, the economy expanded by 5.5%, while in the year 2000, the economy expanded by 8.9%. The year 1988 too was very strong as the economy expanded by 9.9% then.

Hence, the past three Dragon years have seen solid performances as far as the economy is concerned.

For this year, the economic momentum is unlikely to repeat the solid growth that was experienced in the past three Dragon years but growth will be modest at about 4.5%.

Mixed market history

The Year of the Dragon has not been a strong year as far as the market is concerned, based on the performance of the FBM KLCI.

In the past three Dragon years, the FBM KLCI saw a mixed performance with the best showing in the year 1988, when the index jumped 46% or 124.52 points to close at 394.94 points.

The following Year of the Dragon in 2000 was a washout year, probably due to the impact of the dotcom bubble, as the FBM KLCI slumped 25.8% or 246.62 points to close at 711.04 points.

The last Year of the Dragon in 2012 was a mixed year as the FBM KLCI regained its momentum and closed the year at 1,623.80 points, up 101.14 points or 6.6%.

Hence, in the last three Dragon years, the FBM KLCI rose on two occasions but fell in one of them.

How will 2024 pan out?

The local bourse has seen a strong start to the Gregorian calendar but most global markets’ performances in the tail end of the Year of the Rabbit had been mixed, especially the Shanghai and Hong Kong bourses, which were down by 3.7% and 6.9%, respectively.

The Nikkei 225 bucked the regional trend and is now at levels last seen 34 years ago and up more than 10% year-to-date.

Elsewhere, the S&P 500 Index in the United States is at a fresh all-time high and knocking on the 5,000-point psychological barrier at the time of writing.

For Malaysia, the Year of the Rabbit started at 1,500 points and was last seen at 1,512.36 points as of Thursday’s close – one trading day before the Year of the Rabbit comes to an end.

During the Chinese calendar year, the FBM KLCI fell to a low of 1,373 points by the middle of June last year before buying momentum took it higher to its current level.

As at Thursday’s market close, the Year of the Rabbit, as measured by the FBM KLCI, gave investors a positive return of 0.8%.

The question on everyone’s mind is how would the Year of the Dragon be for our market. Where would the market be when we usher in the Year of the Snake on Jan 28, 2025?

Index-wise, the FBM KLCI is seen to have a fair value of about 1,600 points for this year, driven by an expected 13.6% in earnings growth.

Markets are also expected to get some tailwind from dovish central banks as inflation pressure has eased considerably, paving the way for major central banks to begin to unwind some of the steep rate hikes that we witnessed over the past two years.

While geopolitical tension remains, the surprising strength of the US economy as well as selectively among some emerging economies and China’s plan to continue providing fiscal support are some of the positives for Malaysia this year.

Malaysian exports are expected to do better too on the back of a recovery in the electrical and electronic sector, specifically, within the semiconductor manufacturers.

A turning point

The year 2024 is about reforms as far as Malaysia is concerned and efforts are being put in place to get the ball rolling by the unity government.

The introduction of several new taxes, an increase in sales and service tax, the rolling out of targeted subsidies for fuel using a huge database under the Pangkalan Data Utama as well as the pilot run for Progressive Wage Model are examples of what the government has in mind in terms of reform measures.

It is hard work to get this done but with the strong political mandate that the government has now, this is indeed the time for change.

It is hoped that the Year of the Dragon will not be a turning point for Malaysia in terms of its economic journey ahead but a year that will bless all Malaysians with good health, happiness and prosperity.

Pankaj C. Kumar is a long-time investment analyst. The views expressed here are the writer’s own.