MONTREAL - Asian equity markets this week marked time and sought to consolidate
recent gains although indications are that they remain a bit overheated. The
MSCI Pacific Asia Index was stuck just under 95.3 at midday Friday, down from
its 98.0 close a week ago and under its 96.6 intermediate-term high from last
October 14.
The MSCI Pacific Asia ex-Japan Index was down an appreciable 4.7% on the week
to 292.6, barely above its October 14 close of 289.0
Among the nine markets surveyed in this column, only India may close up
appreciably on the week, as the BSE Sensex 30 is ahead 1.5% from last week as
of midday Friday, while nearly all
other major national indices fell between 1.4% and 4.2%. The only exception was
China's benchmark Shanghai Stock Exchange Composite (SSEC), which, despite
being one of the three best regional performers for three out of the five days
this week, closed out up 0.7%.
Shanghai was also the best performing of the three Greater Chinese markets but
has now run up against the resistance at 2,650 to which I pointed last week
(see The Chinese
riddle, Asia Times Online, May 9, 2009) and through which it has been
so far unable to confirm a penetration. The SSEC closed slightly above that
level, near its daily high on Wednesday, but ended the week at 2,644.
The SSEC could mark time moving sideways or even retrace back to 2,400 during
the remainder of the month without given a definitive indication of its
subsequent intentions. By that time, however, it would reach the bottom of the
up-trend channel that has shepherded its rise from 1,700 since the beginning of
last November, and it would be obliged to show its hand.
Hong Kong's Hang Seng Index closed Friday at 16,790, failing to confirm a
tentative breakout above its medium-term support from last mid-October at
16,732 despite closing above that level last Friday and the first three days of
this week. The Taiwan Stock Exchange Composite (TSEC) fell 1.4% on the week to
6,489. It is threatened by the need to decide what to do about two unfilled
gaps-up from earlier this month, the higher to 6,256 to 6,326 and the lower
from 5,627 to 5,932. Technical indicators remain mildly favorable but there is
fear that this market has overextended its recent gains.
Singapore, after accompanying the Indian market on its recent respectable
advance and suggesting a regional strength in South and Southeast Asia (where
Vietnam has been the most dynamic market with Indonesia not far behind), this
week fell back into step with Australia and New Zealand. The Straits Times
Index is down 4.7% over the past five trading days and recovering slightly to
2,131 at the end of the week after dropping like a rock in late Friday trading,
exceeding even the 4.2% decline in the Australian All Ordinaries Index.
For Singapore, this decline represents a necessary test of its breakout through
its secondary long-term descending-tops downtrend initiated in June-July 2008
as well as its medium-term support/resistance at 2,059 from last mid-October.
Australia, on the other hand, closing the week at 3,759, is nowhere near
challenging its congruent long-term descending-tops downtrend or even its
equivalent resistance at 4,287. The New Zealand 50 Index Gross, Asia's
fourth-worst performer, was down 2.9% on the week, continuing to track
Australia in the short term while outperforming it in the medium term.
The Northeast Asian group of South Korea and Japan was the least volatile of
all geographical groups in Asia this week. Their weekly losses, respectively
1.4% and 1.8%, were likewise average overall. These two markets have tracked
one another extremely closely since the current run-up began in mid-March,
though with Seoul slightly outperforming Tokyo over the last month.
There is, however, one significant difference between them in the medium term.
The KOSPI is on the verge of confirming a breakthrough of its mid-October 2008
medium-term resistance at 1,368. It has closed above that level for nine
straight days, and its intraday lows near 1,380 on Thursday (where it closed)
and Friday of the current week may possibly be taken as signaling a successful
test of that resistance level. The KOSPI ended the week at 1,392.
The Nikkei 225, however, has confirmed a failure to break through its congruent
medium-term resistance at 9,448. This week it challenged that level, with an
intraday high on Tuesday of 9,504 and a close the same day at 9,452. It closed
the week, however, at 9,265, failing even to challenge significantly its
secondary long-term descending-tops downtrend initiated last summer, which
reinforced the aforementioned medium-term resistance at the present time.
Finally, the only real gainer this week has been India's BSE Sensex 30, which
has oscillated Friday through early afternoon in a very narrow range between
12,000 and 12,100, marking a gain of about 1.5% over last week's close. All
through this week and the end of last week there were fears of political
instability resulting from indecisive election results, still to be announced
officially.
However, the Indian market on Friday recovered from previous weakness on the
leaking of exit polls suggesting that the Congress Party with its allies would
emerge as the strongest block, and is expected to be able to form a government
without needing recourse to alliance with any of the communist and other
left-wing parties.
A late report in New Delhi's Economic Times, however, citing "sources with
access to decision makers" in all major electoral formations, casts doubt on
the public confidence expressed by the various parties and asserts that "almost
everyone is formulating possible strategies while still in the dark".
That being so, the Sensex (fluctuating around 12,085 in early Friday
mid-afternoon) could still retrace recent gains even dipping below its
medium-term support at 11,483 from last mid-October, before rebounding off its
short-term supports between 10,500 and 11,000 from its more recent trading
range.
An ICICI Bank analysis opines that recent declines are not over. If that is the
case, then the broader-based Nifty, closing the day Friday in the mid-3,600s
could fall as low as 3,130 (plus or minus 3%) before finding firm footing: an
equivalent percentage decline in the Sensex from its current level would mark
the rebound in the low 10,400s.
Dr Robert M Cutler (http://www.robertcutler.org), educated at the
Massachusetts Institute of Technology and The University of Michigan, has
researched and taught at universities in the United States, Canada, France,
Switzerland, and Russia. Now senior research fellow in the Institute of
European, Russian and Eurasian Studies, Carleton University, Canada, he also
consults privately in a variety of fields.
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