Date
17 October 2017
'Sell in May and go away' theory hasn't worked in Hong Kong, going by the market's historical data. Photo: Reuters
'Sell in May and go away' theory hasn't worked in Hong Kong, going by the market's historical data. Photo: Reuters

‘Sell in May..’ turns out to be a load of bull

Hong Kong’s Hang Seng Index advanced 4.25 percent in May, helping the benchmark reach its highest level in 23 months. The impressive showing disproves the old cliche that advises investors to “sell in May and go away”.

Historical data of past 40 years show that the Hong Kong market gained 1.03 percent on average in May. The main index climbed about half the time, despite the “sell in May” warning.

June is often said to be a bad month too, so let’s examine if the statistics bear out the theory.

Well, according to historical data, the Hang Seng Index actually posted an average rise of 0.12 percent in June. Declines took place 48 percent of the time, which is less than half, again suggesting that the so-called traditional market wisdom may not be so true.

While investors can dismiss the old adages, they would however do well to bear one key fact in mind with regard to the market’s recent rally.

The percentage of rising stocks has stayed at low level in recent months. Also, we’ve even seen the odd combination where the Hang Seng index has edged up even though more than half the shares actually did not advance.

If the anomaly continues, it may undermine the momentum of the market rally.

The full article appeared in the Hong Kong Economic Journal on June 1

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RC

Hong Kong Economic Journal chief economist and strategist

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