Does the Rhyming “Sell in May, Go Away” Work?

We evaluates the strategy’s benefits of leaving the market periodically with China equities.

Kate Lin, CAIA 06 May, 2021 | 9:14
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Chinese calendar

The catchy rhyme of “Sell in May, Go Away” particularly appeals to people who trade on market noise. A common version of the “Sell in May, Go Away” strategy is to go to cash on May 1st, and then buy back into the market on November 1st. Ian Tam, Director of Investment Research at Morningstar Canada explains the logic like this: “During the Summer months as investors are less active, trading volumes fall, as does enthusiasm for the market and hence potential for gains.”

Experimenting with his approach in Asia, we picked two widely-tracked benchmarks – MSCI China and the Hang Seng Index – to this test if investors could dodge the ‘downtime’ between May and November, and gain on a short, medium and long-term basis, i.e. one month, one year and multiyear periods.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
CK Hutchison Holdings Ltd49.40 HKD1.13Rating
CLP Holdings Ltd76.35 HKD-0.07Rating
HSBC Holdings PLC43.50 HKD1.28Rating

About Author

Kate Lin, CAIA

Kate Lin, CAIA  is a Data Journalist for Morningstar Asia, and is based in Hong Kong

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