Date
26 April 2019
CICC's forecast that US equities would rise in 2018 proved incorrect, but it was right in predicting increased market volatility. Photo: Reuters
CICC's forecast that US equities would rise in 2018 proved incorrect, but it was right in predicting increased market volatility. Photo: Reuters

The unpredicatable Mr Market

Most investors have probably suffered losses over the course of 2018, given the weak performances of China, Hong Kong and US equities.

There are over 6,000 mutual funds in China, most of which are fixed income funds or funds invested in both fixed income and equities. Only 803 funds are focused on A shares, and just one of them reported positive returns last year as of Dec. 28. 

In fact, this best-performing fund rewarded investors with only about 4 percent gain. On the other hand, the biggest loser lost 48 percent of its value during the period, according to data from the Asset Management Association of China. China International Capital Corp. (CICC), one of the nation’s leading investment banks, was so embarrassed that all of its 10 predictions at the beginning of 2018 – some of them rather bullish – turned out to be wrong. 

These predictions, which turned out incorrect, included the following: China’s GDP growth rate would remain unchanged or accelerate; A shares would post a double-digit return while the Hong Kong market might register positive return throughout the year; US equities were expected to rise; China’s home sales would bottom out in first-tier cities; commodity prices would rise, etc. 

The Shanghai and Shenzhen stock markets slumped by 25.5 percent and 35.2 percent respectively during the year, their worst performance since the 2008 financial crisis. 

There is, however, one thing that CICC was right about: it had expected US equities to become more volatile and that indeed happened. 

CICC chief strategist Wang Hanfeng, who issued the predictions, is set to announce his new set of forecasts for 2019 on Wednesday. 

But as unpredictable as Mr. Market appears to be, this forecasting game will continue and guys like Wang Hanfeng will continue to pocket handsome rewards for doing that. 

This article appeared in the Hong Kong Economic Journal on Dec 31 

Translation by Julie Zhu 

[Chinese version 中文版

– Contact us at [email protected] 

RT/CG

Hong Kong Economic Journal columnist

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