MARKET RAP Asia looking short of wind
By R M Cutler
MONTREAL - Asian stocks, led by Japan and South Korea, were higher last week
but more mixed than they have been recently, with somewhat increased overall
volatility. Gains on Wednesday and Thursday offset a poor start in the first
two trading days, with some consolidation on Friday.
The MSCI Asia Pacific Index rose 2.7% in the week to an eight-month high of
105.1. Its counterpart MSCI Asia Pacific ex-Japan Index gained 2.8% to 333.4.
Tokyo's Nikkei 225, the best performer of the lot on Monday and Friday, when it
had the second-highest volume on record, closed up 3.8% to 10,186. It appears
now to have left behind, at least for the time being, the trading range that it
inhabited since last October. Journalists' commentary this week pointed to
brokerage
firms as the largest gainers, asserting perhaps dubiously that their higher
profits were a mark of increased confidence in future equity performance.
South Korea's KOSPI was one of the region's three best-performing indices on
four of the five days of the week, finishing up 2.4% to 1,429, not much changed
since the beginning of May. This could mark a sideways correction from the
earlier run-up from the 1,000 level at the beginning of March, if the index
does not follow the rest of the region into an anticipated correction later
this month.
The Japanese and Korean exchanges nevertheless show that even in the case of
such a correction, behavior will be differentiated across national markets.
(See South Korea sticks
to business, Asia Times Online, June 12, 2009.)
Taiwan was the most notable of the three Greater China exchanges, with the
Taiwan Stock Exchange Composite (TSEC) declining 4.7% to 6,448, with the bulk
of the loss coming on Monday and Tuesday (when it was down 5.2%), before a mild
recovery Wednesday and Thursday preceding another loss on Friday.
The TSEC is now approaching, from the upside, the upper bound of its gap-up
from the end of April at 6,256. The resistance at the 7,000 level to which I
pointed some time ago (see
Taiwan's ambiguous recovery, Asia Times Online, April 2, 2009) strongly
asserted itself, and the question now becomes whether the TSEC will challenge
that gap-up and, if it does, whether it will feel obliged to fill that gap.
The Hang Seng Index in Hong Kong continued its remarkable advance, up 65% since
its March 9 low, albeit more gradually last week, when it closed up 1.1% to
18,890. According to Bloomberg News, shares are now valued at 15.8 times
estimated earnings, as against a 13.7 average over the past five years. The
Hang Seng is now closing in on the 20,000 level that signifies its next major
resistance.
The third Greater China exchange headline index, the Shanghai Stock Exchange
Composite (SSEC), after being one of the best three performers in the region on
Monday and Tuesday, closed in a statistical fluke near its high on Wednesday
while still being one of the three worst-performing indices that day; then it
was the second worst on Thursday, and then the worst on Friday. It was the
region's least volatile over the week.
I have for a long time been pointing to 2,900 as the top of the current
resistance interval, which began at 2,650. The SSEC has made admirable progress
into this breach but its strength appears to be flagging. Its intraday high for
the week was 2,828 but it closed Friday down 0.4% on the week at 2,744. The
SSEC will have to test, sooner or later, the 2,650 level to confirm it as a
support and, if successful in this, will probably inhabit the 2,650-2,900
trading range for some time.
The Australian market continued its recovery, with the Australia All Ordinaries
marking a 2.3% rise during the week following on the previous week's 4.1% gain.
It stands now at 4,062, with roughly another 5% recovery to go before it tests
technical chart and wave resistances. (See
The charge goes on, Asia Times Online, June 6, 2009.)
The narrower S&P/ASX 200 index follows a similar pattern but ever so
slightly weaker in strength, while New Zealand's 50 Index Gross failed already
last month to sustain a push through the low 2,900s, its level congruent with
the All Ordinaries at 4,300 where the latter has yet to pose its challenge.
Singapore's Straits Times Index remained unable to push through the 2,400 level
and closed down 1.0% at 2,373, the region's second-worst performance on the
week with second-lowest volatility.
The other South/Southeast Asian market regularly covered here, India's Bombay
Stock Exchange, had excellent days Tuesday and Wednesday but these were offset
by the remainder of the week, such that the BSE Sensex 30 rose but 0.9%,
closing the week at 15,238, and with short-term technical indicators not
unfavorable to a further advance although that cannot continue forever,
particularly in view of the three unsuccessful attempts on Wednesday, Thursday
and Friday to penetrate the 15,600 level.
If Asia were trying to lead a global recovery in the equities markets, then we
would be justified in saying that there is some rotation going on here among
national markets taking the lead. However, the equities markets are no longer
divorced from the real economies, so it will take more than charting stock
recoveries to say that the tide has definitively turned.
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.
R M Cutler (http://www.robertcutler.org) is a Canadian international
affairs specialist.
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