MONTREAL - Asian stocks were generally positive this week, as the MSCI Asia
Pacific Index settled just under 103.2, up 1.1% for the week but down from
Wednesday intraday high of 105.6. The MSCI Asia Pacific ex-Japan Index ended at
327.0, up 1.6% but down from its analogous intraday high of 333.67.
Nearly all the major national equity market indices covered here, however,
outperformed the MSCI indices. The exceptions were markets in South Korea and
Taiwan, which were also the only ones down on the week.
The Taiwan Stock Exchange Composite (TSEC) is taking a breather after breaking
into the low 7,000s, as predicted last week
(see Taiwan
goes back to work, Asia Times Online, May 29, 2009). It was down 1.8%
to 6,767 and it was the region's worst performer on three out of the five days
this week
The probability of a further retracement to 6,300, following which there would
be a temptation to fill the gap from May 3-4 by descending to 5,600, remains
the most likely scenario as of this writing. The TSEC was the only major
national index that did not close at or near its intraday high at least one day
this week. At the same time, it was the second-most volatile exchange on a
daily basis.
The most volatile was Hong Kong, where the Hang Seng Index was up 1.6% on the
week by the Friday midday break, which nevertheless kept pace with the TSEC
insofar as Hang Seng's was still the third-worst performance in the region. Its
qualitative difference from the TSEC is suggested by the fact that although the
Hang Seng closed at or near its daily low on three out of the five days of the
week, on Thursday it managed to near its daily high. It looks perhaps to do the
same on Friday, for early in the early afternoon session it is at 18,591, near
its open for the day
The third Greater China exchange was the week's biggest winner. The Shanghai
Stock Exchange Composite (SSEC) closed up 4.6% on the week at 2,754, with
nearly all the advance occurring on Monday and Wednesday. If one goes back to
last week (when the SSEC was closed Thursday and Friday), the index has closed
at or near its daily high on five of the last seven trading days.
The SSEC was also one of the three best percentage gainers on three out of the
five days this week. This momentum and the most recent performance suggest that
a short-term consolidation may be in the works, yet the technical indices are
not unfavorable to a further advance, although the market is close to being
overbought. As I have repeatedly stated here, the whole interval from 2,650 to
2,900 represents a significant resistance.
That being so, it is somewhat impressive that the SSEC has made it so far so
quickly and so strongly. For that reason, a short-term consolidation may even
be desirable, for example to confirm that the 2,650 level has been converted
from a resistance into a support.
The second-best performer of the week was the Australian market, up 4.1%. Much
commentary attributes this improvement to Rio Tinto Group's rejection of
Aluminum Corporation of China's investment offer, in favor of forming a venture
with BHP Billiton and issuing new shares. Rio climbed 9.9% and BHP 8.1% after
the announcement on Friday.
However, the Australia All Ordinaries Index had been performing well all week
and, if we include last week's Friday, May 29, had closed at or near its daily
high for four days running before Rio's announcement. This index was the
third-most volatile of the week. It finished at close to 3,969, with the next
major chart resistance at 4,287; technical wave prediction sets the next limit
to test at 4,313.
The New Zealand 50 Index Gross was the second-least volatile but still finished
the week (it was closed on Monday) with a respectable 2.5% gain to 2,835,
challenging the top of the trading range that it has inhabited for the last
seven and a half months. As this move comes simultaneously with a challenge to
a potential medium-term descending-tops downtrend that began in September 2008,
the resolution will be of some significance.
In Singapore, the Straits Times Index (STI) backed and filled after being twice
this week unable to penetrate through the 2,420 level. It closed at or near its
daily low on two of the days but was still able to gain 1.0% on the week to
2,386 by mid-late afternoon Friday. That said, my projection that the STI is
set to retrace perhaps as far back down as to the low 2,100s (see
Singapore faces long haul back, Asia Times Online, June 5, 2009)
remains the most likely scenario.
In India, the BSE Sensex 30 remains strong. In early mid-afternoon local time
Friday it has reached 15,151, up 3.6% from last Friday's close and (if the
Friday strength holds up) set to close at or near its daily high for no fewer
than four of the five days this week. It is now up 86%, in less than three
months, from its 8,160 low on March 9.
The level in the low 14,800s should have been a significant resistance and the
index indeed hesitated twice, and once at length, before crossing it. However,
it is not yet significantly over the hurdle and should for its own good retrace
back to that level, if only to confirm it now as a support.
The extensively interesting movements of other exchanges does not permit me
this week to discuss Japan or South Korea at any length.
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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