MARKET RAP Down is a four-letter word
By R M Cutler
BRUSSELS - The story of Asian equity markets for the first three to four days
this week, our limit due to Asia Times Online not publishing this Friday, is
fairly easy to tell. Indeed it is a four-letter word: D-O-W-N; an average of
0.6% on Monday, 1.6% on Tuesday, and 1.0% on Wednesday.
The Thursday opens that have already occurred are also all down, between 1.5%
and 2.0% from the Wednesday close. All week, the only closes up from the
previous day have occurred on Monday in Hong Kong (a negligible 0.3%) and on
Wednesday in Mumbai (an estimable 5.4%).
The current week is already marked by significantly higher
volatility than seen recently. Even over the first three days of the week (not
even taking into account the still lower Thursday openings that are for many
markets new lows on the week), the mean swing between weekly highs and lows
averages 4.0% across the nine markets customarily reviewed here (the median was
even higher, at 4.5%).
For once, however, Shanghai was not the most bipolar; that honor goes to
Mumbai, which has already oscillated 7.6% on the week; and Seoul is so far tied
this week with Shanghai for second most volatile, with a 4.8% oscillation.
For a number of the exchanges, their decline, although relatively minor in
percentage terms, becomes analytically significant when added onto previous
losses. The Australia All Ordinaries, for example, opened Thursday at 5,170 and
quickly dropped to 5,090, where stagnated into lunchtime (local time). This
takes it no less than 25.9% beneath its all-time high from last October and,
more ominously, below a support level dating from May 2006 as well as its own
mid-March low earlier this year. It is now resting on a support from an
extended flat run from summer 2006, which is its only technical support above
4,600, after which the drop is to 4,125.
Shanghai also has been continuing its march downwards, closing last Friday at
2,748 and opening Thursday at 2,589 although since recovering to 2,680 about
halfway through the session. Possibly the last precipice has held to prevent
the Shanghai Composite Index from plummeting to the 2,100 level. There is in
fact on Thursday morning some recovery by several other exchanges: Hong Kong,
Japan, South Korea and Taiwan; although only the first two have recovered even
to the level of their Wednesday close.
To give slightly more detail, the Hang Seng Index in Hong Kong has not yet
punctured its low from March this year, but it opened Thursday at the 21,400
level, only about 1.4% above it, although it has since then recovered to
21,780. Also, it has some good support at 20,400, both from August 2007 and an
earlier flat run from the beginning of that year, much like the Australian
support from summer 2006.
The Nikkei is doing especially well and is still significantly above its March
2008 low around 12,000, a level where it would find extremely strong support
established from April 2004 into April 2005, also with backstops down to
11,000.
South Korea seems on Thursday to be finding support at the 1,600 level after
opening down along with the other markets. However, this level is already that
of its March 2008 low, which it had in fact established previously in January
and also in August 2007. By contrast, Taiwan is trying to cover back lost
ground but it will have a hard time of it, facing resistance at 7,500, and
especially at 8,000, with a number of levels in between. This may properly be
considered a 500-point band of varying resistance with strength especially at
the top and bottom of the range.
Mumbai on Wednesday bounced off a support from March 2007, first established in
May 2005, in the 12,600-12,900 range after closing Tuesday down 4.0% from its
daily high, recovering Wednesday up to 13,664. On Wednesday it successfully
punched through a resistance at 13,300 on only its second try, which was
surprising given that this resistance had been established over the course of
three months from March through May 2007. However, it faces still stronger
resistance further up, in the 14,000-14,200 range.
Mumbai opened Thursday 200 points below its Wednesday close and lost in the
opening minutes over 100 points more, down to 13,325. This means that it wants
to test the 13,300 level again, where it found support before and which may
well hold, since that support actually extends in a band down to 12,500. The
problem is that this is not a very well-established resistance, although
another important one dating from May 2006 would kick in at 12,400 if needed.
The Nifty largely confirms these patterns, although its technical supports are
generally slightly lower in proportion to the level of the index.
Finally, Singapore is recovering from the low to mid-2,800s, a support that it
established this past March; its next support level, dating from May 2006, is
in the low 2,600s. And New Zealand, which, however, is not recovering but
falling further. Now below 3,100, it is at its lowest level in three years. A
support at 3,145-3,160 from May 2005 seems to have been no help at all, and if
that continues to be the case, then the next support is in the 2,900-3,000
region.
In sum, the retracements look overall like being only technical rebounds. Some
important support levels have fallen, and others look like being tested. The
bifurcation of turbulence noted
last week seems fairly well reproduced. However, we may have on hand
not a bifurcation but a trifurcation.
The Singapore-Seoul-Tokyo group was fairly cohesive this week in its behavior;
it is possible that Taiwan should be included with them. Shanghai and Mumbai
are a pairing of their own. Last week Hong Kong resembled them, but not this
week. It should perhaps be classed with a third group including all the others;
within this latter group, it is possible that there should be a subdivision
with Australia and New Zealand on one side, and Taiwan and Hong Kong on the
other. We shall watch how this goes and try to discern underlying reasons for
it.
R M Cutler is a Canadian international affairs specialist.
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