MONTREAL - Asian stock exchanges began this week with a promising advance on
Monday but Friday saw the MSCI Asia Pacific Index down for the fourth straight
day, the longest losing streak in over four months.
Journalistic commentary blamed disappointing earnings announcements and
commodity prices, but in fact it was time for a bit of a breather. Even so, the
various exchanges had no general pattern, with the weekly moves ranging from
Tokyo's 3.1% decline to Shanghai's 3.7% rise.
The MSCI Asia Pacific Index closed down 1% from last week at 117.50, while the
ex-Japan Index rose 0.5% to 410.37. Technical indicators suggest that both were
overbought for much of the
middle of the week, due in part to a strong Monday, but that a short-term
buying opportunity may be presenting itself in light of the declines towards
the end of the week.
The two Australasian exchanges, Australia and New Zealand, reverted to form as
the two least-volatile exchanges on the week. They fell respectively 0.3% and
1.4%, as the Australia All Ordinaries Index closed at 4,707, still within its
4,520-4,850 trading range but on weak volume. In Wellington, the New Zealand 50
Index Gross closed at 3,114. Its technical indicators are also very neutral,
and the index is still within its own trading range of 3,035-3,250.
This week, the Straits Times Index (STI) in Singapore diverged from the
Australasian pattern with a 1.6% weekly gain by early mid-afternoon Friday
local time, with rising momentum on the day. As will be evident from comments
below, however, neither did it did not conform to the South Asian pattern
typified by Mumbai. The STI has technically broken out of its short-term
trading range to the upside, but is coming up against the 2,790 resistance with
has favorable, though not excessively strong, short-term indicators.
The star performer this week was mainland China, where the Shanghai Stock
Exchange Composite (SSEC) rose for the first four days of the week before
settling back slightly to 3,320 late Friday afternoon or up 4.2% on the week.
The Thursday close was 3,321 and the week's intraday high was 3,332 on Friday.
The SSEC has paradoxical technical indicators, showing it to be overbought in
the short term but still with significant upward momentum. So far as the chart
itself goes, there is no significant resistance below 3,500 and there is
support just above 3,150. Shanghai and Hong Kong were two of the three
most-volatile exchanges this week, but Taiwan was the third least.
Still, as I mentioned last week, Taiwan and even Hong Kong are continuing to
differentiate their moves from Shanghai. They were in the middle of the pack
this week, up 0.2% to 7,683 and down 0.1% to 22,529 respectively in Friday
afternoon trading. Resistance for the Taiwan Stock Exchange Composite (TSEC) is
in the interval 7,730-7,760, but the short-term technical indicators are
relatively strong. Short-term technical indicators for the Hang Seng Index in
Hong Kong are also moderately strong, although weaker than for Taiwan, and the
index is right up against a long-term resistance at 22,500.
The two major Northeast Asia indexes had diametrically opposed performances
this week. Seoul's KOSPI was the second largest gainer, up 3.3% to 1,624, while
the Nikkei 225 in Tokyo was the worst loser, down 3.1% to 9,463, both by late
afternoon Friday local time. Tokyo was the most volatile exchange of the week,
Seoul the fourth most. The Nikkei's technical indicators presage continued
weakness despite an apparent condition of being oversold; there are short-term
supports at the current level but they seem weak. The KOSPI's technical
indicators have improved somewhat over the past week and are neutral to
slightly positive.
In Bombay, the BSE Sensex 30 is down 0.6% on the week to 16,752 in late morning
Friday local time, after having closed as high as 17,051 on Wednesday (with an
intraday high of 17,099 on Thursday). A month ago I wrote that this index's
three-month trading range had then topped out in the low 17,200s, where there
is significant resistance from multiple tops from the first quarter of 2008
extending up into the low 18,000s. The short-term technical indicators are
still favorable but have weakened a bit since last week. The broader-based
Nifty index has slightly better technical indicators than the Sensex.
There are no general lessons to draw this week. India has been warned by the
Organization for Economic Cooperation and Development to tighten monetary
policy or risk increasing inflation. Indications are that China is already
reducing credit growth in response to the danger of an emerging bubble,
although it is far from clear that trading partners such as the US will take up
the slack if internal demand eases as a result.
Yet Seoul moved strongly upward and Taiwan slightly, despite projections of
decreased consumer electronics components demand. Thus it was another week
without even clear sub-regional patterns, as national markets continue to go
their own ways in response to differentiated microeconomic and macroeconomic
situations.
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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