MONTREAL - South Korea led Asian equity indices broadly and sharply lower this
week. Seoul's KOSPI, in addition to being by far the most volatile index, was
the worst loser of the major exchanges on Tuesday and Friday this week, second
worst on Thursday, and third worst on Monday, ending down a huge 10.6% since
last Friday to close at 1,066.
With the top of its current narrow trading range now firmly established just
above 1,200, it has now just broken tentatively through that range's bottom.
The next technical supports are at 1,006 and 970.
This augurs poorly overall, inasmuch as, with Tokyo, Seoul is one of the Asian
bellwethers for global equities as a whole. By contrast, Tokyo was relatively
placid but with emphasis on the
"relatively" as the Nikkei 225 closed at 7,416, down 4.7% since last Friday
although the second least volatile of the major indices. This is the Nikkei's
worst weekly performance in a month.
More ominously, the broader Topix index closed 740, its lowest level since
January 1984. The narrative most often adopted in the press as a story line to
explain this move is the prospect of further declines in corporate earnings.
Also on Friday, Bloomberg News quoted the Bank of Japan's reporting that
economic conditions in the country have "deteriorated significantly" to the
point where small businesses especially are having difficulty getting bank
loans. As for the Nikkei, its next technical support is at 7,162, a local
minimum established last November 26 during a one-day dip from the 7,600 range.
The Shanghai Stock Exchange Composite (SSEC), after powering up on Monday to
close at 2,389 and following through briefly to an intraday high on Tuesday of
2,402, fell for the remainder of the week to close at 2,232, down 3.8% since
last Friday.
It is not even very encouraging that this was the second best weekly
performance after the decline by the Taiwan Stock Exchange Composite (TSEC) of
3.2%, to a close at 4,444, for the relative docility of the SSEC's absolute
move this week is belied by its and Hong Kong's high volatility. The TSEC still
has short-term support terraced down to 4,000, following which the long-term
supports kick in at 3,850 and 3,590.
The Hang Seng itself was down about 6.3% on the week at 12,699. This level
augurs a test of the support in the low 12,600s that was established last
October-November and which represents the last major near-term support
available, although with backstops at 12,583 and 12,299 as well as much lower
at 11,015. Of these latter supports, the last in fact appears the strongest,
reinforced by a long-term low from May 2004 at 11,276.
Officials in the Chinese government have indicated for the first time that they
may revisit the projected 8% economic growth figure for 2009, which is the
level generally agreed to be required for a level of job creation sufficient to
restrain possibilities for social unrest. The IMF lowered its estimate some
time ago to 6.7%, and still other estimates go lower. (See, for example,
Asia turns blind eye to facts, Asia Times Online, January 23, 2009, and
Chinese demand a wobbly bulwark, Asia times Online, December 24, 2008.)
The usually calm New Zealand 50 Index Gross was the third-largest loser this
week, closing down 6.3% at 2,577, the exact level of its medium-term support
from last mid-November. There was no clear news to account for this drop,
nearly half of which occurred on Monday. On Friday, the government did release
a statement projecting a shortfall in tax revenue and corresponding increase in
government deficit due to the economic contraction.
It is indicative of the type of week it was, that the Australia All Ordinaries
could lose 4.1% on the week and still be the region's third-best performing and
third-least volatile index. Closing at 3,353, it is at the bottom limit of its
short-term trading range and may easily resolve to the downside as its banks'
credit ratings appear to be ripe for downgrading and the credit crisis spreads
to from high-risk to ordinary borrowers.
Australia's interest rates are now lower than at any time in the past 45 years,
and recent comments by Central Bank governor Glenn Stevens have given rise to
expectations of still further cuts, although reading between the lines suggests
that he really does not want to have to continue on doing this much longer: nor
can he, with the overnight cash rate already down to 3.25% and a market
expectation of a cut of another 125 basis points.
Before closing out this week's survey, it is absolutely necessary to draw
attention to the Indian exchange, which I have not discussed recently since it
has meandered uneventfully in trading range described some weeks ago. At Friday
midday, the BSE Sensex 30 is in the low mid-8,840s, down 8.2% from last
Friday's close and the week's second-worst performer.
The Sensex is therefore getting ready to test the bottom end of its current
trading range, which is at the 8,500 level and reinforced by a long-term
intermediate high from early October 2005 but of which the strength is not
really altogether that impressive. Should this level fail to hold, however,
there is no further next technical support on the downside until the
6,400-6,600 range.
The top of that range would represent a decline of nearly two-thirds from the
index's all-time high of nearly 21,000 reached in early January 2008. It is
not, unfortunately, entirely out of the question.
A bottom near 7,750 would be nearly 62% down from that all-time high and by
pure "chartist" calculations should be a bit more likely. This becomes
possible, if the chart treats a week 7,750 local minimum from late October 2005
as part of a web stretched down from the 8,500 support established earlier that
month. However, it is uncertain whether a significant downward thrust would
exhaust itself by that level.
R M Cutler (http://www.robertcutler.org) is a Canadian international
affairs specialist.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about
sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
