MONTREAL - Asian stocks churned slightly higher this week, although the gains
were not evenly distributed across national equity markets. The MSCI Asia
Pacific Index tended towards 101.8 at its close, nearly unchanged from last
Friday's close of 101.9, while its ex-Japan version at 318.2 eked out the
smallest of gains over last week's 316.9 close.
The week's best performer was the Taiwan exchange, where the Taiwan Stock
Exchange Composite (TSEC) tested the upper bound of its gap-up from the end of
April, when it jumped from
5,614 to 6,380 in two days. For three days running this week the TSEC continued
to test this level, descending to 6,200 on Monday through Wednesday, before
rebounding on relatively strong volume to close Friday up 3.7% from last week
at 6,464.
In fact, the TSEC has been in this range since its June 15 close at 6,226 with
a June 18 intraday low of 6,100, which could retrospectively possibly be
considered as "within experimental error" of the April 17 intraday high of
6,071. (For background, see
Taiwan's ambiguous recovery, Asia Times Online, April 2, 2009, and
On the cusp, but of what?, Asia Times Online, May 2, 2009, ).
However, the Shanghai Stock Exchange Composite (SSEC) did not share the TSEC's
strength, losing steam as expected in the low 2,900s, with the week's second
lowest volatility among the major equity indices. After failing all through
midweek to break through the 2,940 level, the SSEC had by late afternoon local
time Friday still notched a 1.4% gain on the week to 2,920, which was also the
level of its close on July 18, 2008, initiating the current trading range. In
the absence of unexpected highly positive news, the SSEC may be expected to
continue within its 2,650-2,920 trading range for the foreseeable future.
Hong Kong, the third Greater China exchange, nevertheless shared Taiwan's
strength, reaching 18,488 by the midday break, up 3.2% over last Friday's
close, the second best performer of the week and one of the three strongest
indices on four out of the five days this week. This is equivalent to the level
of two separate short-term supports from last month and two separate long-term
supports from the second half of September 2008.
The Singapore market turned in the third best performance on the week. In late
mid-afternoon local time Friday, the Straits Times Index (STI) was up 2.0% from
last week's close to 2,318, making ready perhaps to challenge the resistance
near the 2,400 level, which it was unable to penetrate throughout the first
half of the month.
Indeed, that 2,400 level shows strength both from that short-term strength and
also from the medium-term reaching back to the second half of September 2008.
In this connection it is obligatory to stress that the long-term chart shows
strong resistance slightly higher, in the 2,485-2,505 range, from January 1994
and February 1996, confirmed in December 1999 and January 2000.
The chart of the Indian market did not share Singapore's strength but still
somewhat resembles a combination of Singapore's with Taiwan's structure. The
BSE Sensex 30, for example, had a gap-up in mid-May after the results of
elections to the Lok Sabha (Lower House) were announced. Since then it has
traded in the 13,500-15,600 range. This week, as of midday local time Friday,
it is at 14,457, down 0.5% on the week, the worst performer on Monday and
second-worst on Thursday.
It bears noting that for three days running earlier this month, from June 10
through 12, the Sensex challenged and failed to surmount a resistance level
just below 15,600 inherited from mid-July 2007 and early August 2008. The Nifty
is at 4,315 midday on Friday, almost unchanged on the week; it bears noting
that this broader-based index exhibits exactly the same short-term and
long-term structure with reference to the 4,620 level as does the Sensex with
respect to 15,600.
The KOSPI in Seoul closed up 0.9% on the week at 1,395. It has been stymied
since early May around this level, stuck in a trading range from 1,360 and
1,435 (for background, see
South Korea sticks to business, Asia Times Online, June 12, 2009). Also
there is a long-term basis for this behavior, at a resistance level first
sketched in January 2006, confirmed that May, and then reconfirmed as a trading
range from September 2006 through March 2007.
Moreover, a long-term descending-tops trendline (traceable from late October
2007 through mid-May 2008) is like to constrain any possible upside move. It
would not meet the KOSPI's present level for some time, but the KOSPI could
make one last surge to join it before falling definitively back. Next week that
descending-tops trendline passes through the low 1,550s. Tokyo's Nikkei 225
matched the KOSPI's 0.9% gain on the week, to finish at 9,877 on relatively
weak volume. It has still to test the top of its former trading range at 9,500
to confirm that level as a support.
In Australasia, Australia's All Ordinaries Index was up 0.1% to 3,900 while the
New Zealand 50 Index Gross was down less than half of that, effectively
unchanged at 2,771. This means that the former has broken below its short-term
uptrend begun in early April. The question now becomes whether it will search
for support in the 3,700s or try to break back through that uptrend, now a
resistance, which to be successful it would have to do strongly in the near
future.
The relatively weak volume on Thursday and Friday is not encouraging. The
latter of the two, by contrast, is now testing the top of its recent trading
range from the upside to see whether or not it will act as a support for a
further move. If it does, it seems unlikely that that move will go much further
beyond its short-term 2,830 high, at which level the medium term also confirms
a resistance.
In sum, the Asian equity markets look to be preparing one last possible fling
before settling into summer doldrums. However, as earnings season is coming in
the next few weeks, such a fling is likely to be short-lived.
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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