MONTREAL - Asian equities rebounded strongly on Thursday after a desultory
first three days of a week foreshortened in this commentary for publication
reasons.
General press commentary was unable to find any developments on Wall Street to
explain the behavior of the Asian equities this week, so they pointed instead
to Japan, in particular to unexpected increases in machinery orders and the
proposal of a new stimulus plan by the government in Tokyo. That the Bank of
Korea declined to modify its interest rate was also taken as a positive sign,
even as Australian unemployment soared, leading to speculation of further cuts
there.
The equity exchanges in the Australasian group (Australia, New Zealand, and
sometimes Singapore) were the least volatile and
also almost the worst performers this week. The Australian All Ordinaries and
the New Zealand 50 Index Gross were down respectively 1.8% and 1.7%, exceeded
through Thursday mid-afternoon only by the Shanghai Stock Exchange Composite
(SSEC), down 3.4%, and to which I shall return in the course of commentary on
the Greater China exchanges. Singapore's Straits Times Index was also one of
the worst performers on the week, gaining only 0.7% by Thursday mid-afternoon.
Yet the Singapore index may possibly finish the week above its key 1,829 close
from last November 4. That would set the stage for an assault on the 1,925
level attained on January 5, which would in turn provide technical confirmation
that Singapore is participating in the worldwide bullish reversal now under
way, as if its more than 20% rise from just one month ago, from its crucial
1,506 close on March 11 confirming support from the intraday low of last
October 29, were not enough.
Given this move by the Singapore market, the behavior of the Indian equity
indices acquire still greater significance, as the BSE Sensex 30 (and its
broader-based companion Nifty) is along with the Straits Times Index a critical
indicator pointing to which pattern of the regional groups (Australasia,
Greater China, Northeast Asia) is likely to predominate in Asia more broadly.
The fact that the Sensex has been both the most volatile and the best performer
of the week, up 4.6% through Thursday early afternoon in the high 10,800s,
therefore emerges with added significance.
Specifically, the Sensex (unlike the SSEC for example) looks like closing for
the second straight day above the 10,631 upper bound (from last November 4) of
the trading range that has constrained its moves since last mid-October, and
appears to wish to mount a crucial challenge to the 10,945 intraday high (from
last November 5) from that range. Should the Sensex succeed in this, then it
will be in a position to challenge the governing descending-tops downtrend
instantiated from its all-time high in mid-January 2008. Naturally, such a move
would require supporting data not only by the Sensex's internal technicals but
also at least by the Nifty, if not also by other Asian exchanges to confirm
that it is more than an idiosyncratic move.
In particular, it is noteworthy that the SSEC is now taking the pause that I
have predicted over the last several weeks. It has notably failed to move out
of the broad 1,700-2,400 trading range that it has inhabited since the end of
last August. Nevertheless, it showed surprising strength late on Thursday to
recover from an intraday low of 2,331 and close at 2,380. If it succeeds in
surmounting the upper limit of this trading range, then its next challenge will
come throughout the 2,600-2,800 range, where resistance from the first quarter
of 2007 was confirmed over the course of summer 2008.
The other two Greater China exchanges nevertheless exhibited significant
dynamism. Taiwan and Hong Kong were the third and fourth best performers on the
week, up 2.5% and 2.3% respectively, with two of the three strongest Thursday
percentage gains in the region. The Hang Seng Index, closing Thursday at
14,877, is not quite ready yet to challenge its trading-range high from
December 11 at 15,614 or its intraday high from the same day at 15,781.
The Taiwan Stock Exchange Composite (TSEC), however, has vaulted over its late
2008-early 2009 trading range without even looking back only 10 days ago to
establish a short-term support in the very low 5,200s, in order to confirm that
it has surmounted not only the pre-existing medium-term trading range but also
the medium-term resistance immediately antecedent to that range.
The TSEC is nevertheless well poised to make a run a moderate medium-term
resistance around 6,000 (which is however reinforced by long-term resistance of
some potential strength, first manifesting in 1999, confirmed in 2002, and
reconfirmed from 2004 through 2006). Should the TSEC have the requisite
momentum to overcome 6,000, then the low 7,000s (see
Taiwan's ambiguous recovery, Asia Times Online, April 2, 2009) become
the next significant medium- and long-term resistance.
To conclude, the autonomous bellwethers of the Asian region, Seoul and Tokyo,
turned in performances that give rise to guarded optimism. While each exhibited
a volatility near the median for Asian exchanges this week, and Tokyo's Nikkei
225 had the median gain of 1.9% (again through Thursday), Seoul's KOSPI had the
second-best gain on the week, up 2.6% to 1,316, recovering from earlier
declines in the week to post a 4.3% rise on Thursday alone.
The latter index, which with the SSEC had suffered the most precipitous decline
since the outbreak of the global financial crisis and associated stock market
crashes, has this week confirmed its break-out over the level of the low 1,200s
that represented the upper bound of its trading range since the last week of
October 2008.
The KOSPI's next challenge, in order to demonstrate that this is not a false
move, is to fill the gap up to 1,368 that still survives from mid-October.
Since that gap's lower edge is at 1,288, the KOSPI has already signaled its
willingness to take that challenge. Success in vaulting over the upper edge
would be challenged in turn by an minor interval of resistance in the low
1,400s, and then by a more major one extending throughout the 1,500s up to
1,600.
R M Cutler (http://www.robertcutler.org) is a Canadian international
affairs specialist.
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