Wednesday, July 31, 2013

August a.k.a "Ghost Month" is coming [What to expect]

We've all heard of it at least one point in our life, but what is Ghost Month really and what does it entail?

I've heard about it since I was a child; my mother owned a business and she always associated August as "Patay na Buwan" (Dead Month), or I guess it's the same thing as "Ghost Month". It is when business growth (not just profits) usually slows down. It is only recently that I knew it originated from a Chinese belief about spirits roaming the earth at this period.

The 7th month in the Lunar calendar (not Gregorian) is generally referred to as the Ghost month. If we were to base it in lunar calendar, it means it doesn't always start in the month of August. It's probably for simplicity that August became the Ghost month and for that reason, this articles assumes the same thing.

The 15th day of the 7th month in the Lunar calendar is the Chinese Ghost Festival. This year, 2013, it's on the 20th of August. This is the time when it's believed that our realm + heaven and hell open, and spirits wander the earth.

During this month, it's most likely that many businesses, including non-Chinese ones, who believe in this do not sign new contracts or conduct any major decisions because it may be considered bad luck. In a business culture highly influenced by the Chinese, this is something to be considered because it will most likely affect your business whether you like it or not.

But not only does August fall on the Chinese Ghost Month belief, there are other seasonal events that happen to fall in the same period: Frequent rains / storms, parents just finished paying the tuition fees of their children, and preparation for Christmas season when people really spend money. All of these combined affect consumer spending and businesses.

So what happens to investments during August a.k.a. the ghost month? Bond market is not that much affected since debts are paid continuously. The only thing I can think of right now that may affect the bond market is that there may be less businesses who will offer new bonds during this period.

For the stock market, expect a temporary downward trend during this month. People who believe in this may stop buying or selling stocks. Combined with other people who are fearful during this month, we may see lower volume of trades during this period.

For those invested in Mutual Funds or UITF's, it's the same thing, since your fund is invested in the same Bond or Stock market.

If you want to know if you should take your profits and sell your stocks prior to this period, then I believe the answer is No. It's tricky to time the market, and Ghost month is not a crisis. In fact, this month may be an opportunity to buy more shares in the company you believe in when the share price goes down. Just like the saying goes, "Buy when people are fearful".

I asked my Chinese friend if he stops buying and selling shares during the Ghost month period and he said "No, in fact, my first big gain, I bought them during the ghost month."

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