Investing in the Year of the Wood Dragon

Welcome to the Year of the Wood Dragon. In 2024, the Dragon – which ushers in prosperity and good fortune – combines with the Wood element. The Wood Dragon is believed to feed fire and is a symbol of economic activity and optimism.

In the spirit of the Lunar New Year, Citi is proud to present the top 10 high-conviction opportunistic investments for 2024 from industries that conventionally represent fire and are positioned for strong results in the year of the Wood Dragon. These include finance, energy, healthcare and technology sectors that you may consider for your portfolios and strategies.

Dragons in The Digital Age – Tech Gems to Invest In

Alongside the rise of technology in global markets, these dragons are propelling the sector with force, fuelled by the rapid developments in artificial intelligence. Investors seeking to capture growth may consider opportunities in tech manufacturing from individual semiconductor parts to medical products.

Semiconductor equipment markets

The revolution in artificial intelligence (AI) depends heavily on advanced semiconductors that support data centres and computing facilities. The US and its allies are seeking to bolster their supply chain via subsidised spending on chip equipment and battery tech makers.

Cybersecurity shares

Online fraud and political disinformation are intensifying, with corporate spending on cybersecurity rising in response.

Medical technology and tools companies

Higher rates have hit MedTech valuations hard. We now expect AI-accelerated drug discovery and testing, more mergers and acquisitions and greater capital expenditure. We seek cheaply valued tech and tools exposure.

Tapping into Power – Unearthing Driving Sources

The impact of oil prices from Russia’s invasion of Ukraine, and the growing commitment to transition away from fossil fuels to clean energy have led to extensive investment and experimentation with new technologies in the energy sector. Related industries have stamped their indispensable influence on the global economy, leaving behind an unmistakable imprint, like a dragon’s claw.

Copper miner equities and clean energy infrastructure

Copper is vital to the clean energy transition, with high-demand, restrained supply and no substitution supporting its price outlook. We favour investments across various profitable producers.

Western energy producers, equipment and distributors

Geopolitical strife and supply constraints are helping keep traditional energy prices and related firms’ cash flows high. Investments in many oil and gas producers, pipelines and equipment makers are both a potential source of income and partial hedge against inflation and geopolitical risk.

Emerging New Stories – Breathing New Life into Business

Like dragons chasing after their pearl (of opportunity), investors can follow these blazing possibilities towards fortune.

Private capital asset management firms

Regulatory pressure on banks has created potential opportunities for private credit and equity funds that provide financing. Investors may seek to own such asset managers via listed equity and alternative vehicles.

Private credit and structured debt securities

With banks less able to lend, private debt demand is healthy and investors are keen to own this asset class. Suitable and qualified investors may also consider structured credit where high yields are available.

Indominable spirits: over land, sea, sky and the rising sun

At the heart of a dragon lies heroism, which protects, leads and restores stability to an established order. These areas support the economy even amid economic uncertainty.

Defence contractors

Amid conflicts in Ukraine and the Middle East, NATO members are hiking defence spending. US and European defence equipment and arms producers’ share prices have suffered on supply constraint concerns, but we see catch-up potential.

Normalisation of the US yield curve

The US ten-year-one-year yield curve has been inverted for 15 months, with the longest ever being 20 months. It can steepen via rising long-term rates and/or falling short rates. Suitable clients may consider “curve steepening” strategies.

The Japanese yen and yen-denominated tech and financials

The trade-weighted Japanese yen hit a two-decade low in 2023. We now expect a stronger Japanese economy and monetary tightening. Likewise, direct currency positions, Japanese banks, semiconductor, battery, robotics and automation equities offer yen exposure.

Investing in the Year of the Wood Dragon

Wood years set the tone for growth, development, and harmony while dragons are recognised for their flexibility and creativity. Together, this combination suggests a time to build foundations of innovative growth into new transformative opportunities.

May you embrace the spirit of the wood dragon in your investment strategy for 2024.

Speak to your Citigold or Citigold Private Client relationship manager and learn more about our top 10 high-conviction opportunistic investments for 2024.

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