MONTREAL - Equity exchanges in the region faded sharply, with their poorest
week in quite a while as almost all retraced and consolidated recent advances.
(See Asia
looking short of wind, Asia Times Online, June 16, 2009).
Only the Shanghai exchange posted a gain, and with the exception of New Zealand
all others were down at least 2.8% as of early afternoon on Friday in
Singapore, situated in a more or less midway time zone between Mumbai and
Wellington. The MSCI Asia Pacific Index was down 4.3% to 100.6, and even its
ex-Japan version fell 3.4%.
The Shanghai Stock Exchange Composite rose 4.9% to reach 2,879 late in the
trading day. Not only was it the best performer
on three days of the week and second best on a fourth, but also it closed at or
near its daily high three days out of five and continuing to approach the 2,900
level that marks the upper bound of the band of resistance and support that it
now occupies. This interval likely may represent its trading range for the near
future, even if it throws a leg over the top before settling back. Although it
was by far the best performer, it had only average volatility this week.
The other two Greater Chinese exchanges also had medium to high volatility
(Hong Kong was the second-most volatile, following Mumbai) but medium to poor
performances: Hong Kong was down 5.3% as of the midday break, and Taiwan fell
3.4%. At 6,231 the Taiwan Stock Exchange Composite is about to encounter in the
6,100s its first real potential support level since falling steadily from its
June 1 short-term high of 6,954. However, it is now into the large gap-up from
the beginning of May and as I have pointed out before should fall at least to
6,000 and possibly as low as the lows 5,600s in search of support after fully
filling the gap.
The Hang Seng Index in Hong Kong is down to around 17,920 and beginning to
catch support from mid-September 2008, but could fall as low as the 17,500s,
where there is both short-term and medium-term support, before finding its
feet; after that, the next supports kick in only in the low 16,800s and then in
the high 15,500s. Wave structure of the chart points to the latter, but only if
certain patterns are followed in the interim.
Perhaps the most notable pair of exchanges this week were Mumbai and Singapore,
again suggesting a South/Southeast Asian geographical grouping of equity
markets. They were two of the three most volatile exchanges this week and also
two of the three biggest losers. Mumbai's benchmark index BSE Sensex 30 was off
6.3% by early afternoon local time on Friday to 14,277, not yet approaching its
unfilled gap-up from mid-May that stretches from about 13,600 down to the
nearly 12,000. The Indian index closed at or near its daily low on Monday,
Wednesday and Thursday and looked set to do so again on Friday if early trends
held up through the end of the day.
For its part, Singapore's Straits Times Index closed at its daily low on Monday
and Thursday and looked as if preparing to do the same, or close to it, on
Friday, in the mid-2,200s, making ready to challenge the top of its former
medium-term trading range in the low to mid-2,100s.
Tokyo and Seoul continued the more or less average performance that they have
put in over the past several weeks, although "average" this week meant declines
respectively of 3.5% and 3.2%. The Nikkei 225, closing the week at 9,785, is
not far above the 9,547 level representing the upper bound of its recent
medium-term trading range. Seoul's KOSPI is still above the level of its
trading range but testing the 1,367 medium-term support, below which its next
support kicks on only in the low 1,200s.
New Zealand put in its regular rather docile performance, with the 50 Index
Gross still closing down 3.4% to 2,784 and the Australia All Ordinaries closely
following on the same pattern, down 3.8% to 4,061, closing at its daily low
twice during the week as did the New Zealand index, and remaining well within
its trading range first adumbrated last November.
In sum, Asian exchanges this week showed weaknesses that have not yet
progressed beyond the point of consolidation of recent advances, but which in
several markets will next week reach significant supports below which
indications for the region as a whole become more equivocal, threatening that
the present correction may become more drawn out and generally weakening the
overall economy.
In such an event, the relative strength shown by Shanghai alone will not be
sufficient to bring the region's equity markets out of those incipient
doldrums; this would augur poorly for further economic recovery, recent
positive signs notwithstanding.
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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