MONTREAL - Asian stocks continued their recovery this week, albeit in a fashion
less spectacular than that to which observers have become accustomed. Major
individual exchanges show good strength, but the MSCI Asia Pacific Index is
still meandering below its short- and medium-term resistance level, which
stretches in a band from 90.37 up to 96.61.
In late afternoon on Friday, the index was at 86.28, having found a short-term
level between 83 and 84. Its pattern closely parallels that of major exchanges,
although the Shanghai Stock Exchange Composite (SSEC), which appears to have
overcome short-term resistance in the low 2,300s, is even stronger than the
MSCI, as it is on the verge of breaking upwards through its medium-term
resistance in the 2,400-2,500 range. (I have for some time in this
column been pointing to a 1,950-2,250 trading range set within a broader
1,700-2,400 support/resistance interval.)
The SSEC was at 2,437 on Friday in late-afternoon local time. Press commentary
naturally attributed the SSEC's strength to the outcome of the Group of 20
meeting in London but also pointed to a rebound in the manufacturing sector and
prospects for an absolute recovery of economic growth in the second half of the
year.
This point of view, which hopefully projects a 10% year-on-year growth in gross
domestic product in the last quarter of 2009 (not to be confused with a 10%
annual growth rate, since the statistics are calculated and reported
differently (see
Asia turns blind eye to the facts, Asia Times Online, January 23,
2009), would however appear to assume an implicit "decoupling" of the Chinese
economy from the rest of the world, which will take longer to stage a solid
recovery even if the hypothesis of Chinese growth is correct. Let us recall
that pre-crisis talk about the "decoupling" of Asia from Europe and North
America turned out to be a chimera.
The Shanghai index was in fact an average performer this week, its 2.6% gain
matched by the Taiwan Stock Exchange Composite, which rose to 5,531, and almost
matched by Hong Kong's Hang Seng Index, up 2.5% to 14,470 by late afternoon
local time). As this week's results suggest, the patterns of the three Greater
China indices are beginning to converge again, although only over the recent
short term, as Shanghai showed significantly more strength than the other two
during the periods from early November through mid-December last year and
mid-January through March this year.
Since the New Year, Taiwan has outperformed Hong Kong but underperformed
Shanghai (see also
Taiwan's ambiguous recovery, Asia Times Online, April 2, 2009).
The best performers this week were Singapore, Seoul, and Mumbai. Singapore thus
continues to track India as it has done for some time (see
Bear market rallies, Asia Times Online, March 28, 2009), although the
Indian exchanges were closed Friday for a long weekend, ending Thursday at
10,349, up 3.0% on the week.
Singapore was a better gainer, up 3.7% at 1,810 late in the day local time and
near its 1,819 high for the week.
Seoul, meanwhile, has become the first major Asian exchange to confirm its
breakout above its medium-term resistance. That resistance was well established
at 1,205 before the KOSPI overcame it last week, then falling back to test it
this past Monday and Tuesday. The test was successful as the index bounced off
a Monday intraday low of 1,196 to close Thursday 5.9% above the resistance. It
tacked on a further, modest gain on Friday to finish 3.9% above the previous
week's close at 1,286. This success, which may (or may not) need to be
confirmed once again, augurs well for the other aforementioned equity indices
such as the SSEC and the Australian All Ordinaries.
The other major relatively autonomous exchange index besides KOSPI, Japan's
Nikkei 225, gained 1.4% on the week even though it was the second-worst
performing index in the region. (Only New Zealand ended the week in negative
territory, down 1.5%.) The Nikkei 225 tracked the KOSPI quite closely from last
October through mid-January, when the latter diverged and acquired behavior
characteristic of the SSEC although still not participating fully in Shanghai's
strength.
The month of January is the time when the KOSPI began to recover faster while
the Nikkei continued to slump. The Japanese index closed Friday at 8,750 with
its own near-term resistance, congruent to that of above-mentioned indices, at
9,240 and its all-important medium-term resistance unequivocally manifest at
just over 9,500 (actually the interval 9,521-9,547).
There will probably be no clearer indication of the medium- to long-term future
for Asian equities that the Nikkei's success or failure to surmount this
resistance level; but first, it has to confirm the current breakout above
8,664, which near-term resistance already blocked a further advance last week.
The Australian and New Zealand currencies advanced for the fifth straight week
on the basis of recovery of the national equity markets, even though those
markets have in general lagged Asia as a whole, and with New Zealand lagging
worse than Australia. For the Australia All Ordinaries Index, the nearest key
level is at 3,728, representing both short- and medium-term resistance. The
index closed Friday at 3,674.
Like the SSEC, it has the chance in the coming week or two to break out upwards
through the resistance level that has lately constrained it, although the SSEC
has the chance to overcome the resistance that has held it back over the last
four months while for the All Ordinaries that resistance level is a bit higher,
at 4,287.
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
