With the Chinese New Year upon us, people all over the world will be welcoming in the year of the monkey! While the Chinese markets will be closed for a week-long holiday, we’ve decided to analyze the market trends that typically succeed during this period.
It goes without saying that in recent times, Chinese markets have been at the forefront of volatility. With no market activity to come out of China this week, it wouldn’t be unreasonable to see volatility subside for the time being. US markets have traditionally welcomed this holiday period with moderate gains across the major US indexes since 2006 – 0.22% across the Dow Jones; 0.3% on the S&P 500; and 0.73% for NASDAQ.
Turning our attention to more specific trends, and we find that gold and silver prices usually rise from a spike in demand for said metals due to the customary exchange of jewelry between those celebrating the Lunar New Year. In fact, since 2006, Silver has delivered a positive return for the week in all but one instance – furthermore, the average increase across this holiday period has been a notable figure of 2.6%.
With little to no activity from China across this timeframe, ADRs tend to decrease. One company, however, has continued to defy this trend. Baidu, China’s equivalent to Google, has ended the Lunar New Year higher 70% of the time over the last 10 years, while also averaging a gain in excess of 3%. With that said, American companies with a high degree of exposure in China have also fared well in the past, as it is not uncommon for Chinese families to exchange ‘luxury’ presents and spend more money on entertainment purposes or recreational events to celebrate.
From Ser Man Traders, we wish everyone a Happy Chinese New Year, and a prosperous year ahead in 2016!