MARKET RAP Best of times, worst of times
By R M Cutler
MONTREAL - In perhaps one of the best-known opening sentences in world
literature, Leo Tolstoy in Anna Karenina wrote that all happy families
are alike, but each unhappy family is unhappy in its own way. What goes for
families evidently does not go for equity markets. In Asia this week, those
markets closing down on the week all shared a similar pattern, but those
closing up were all different from each other. That is, every unhappy stock
exchange was alike, but every happy stock exchange was happy in its own way.
Largely by coincidence, Australia, New Zealand and Singapore shared a common
pattern, at least through Thursday. Contrary to what one may expect, Australia
and New Zealand do not usually track one another. Due mainly to their different
export profiles, New Zealand is almost always weaker. The divergence
become
unequivocal in the autumn of 2005 and has grown more marked since spring 2007.
Even if they sometimes have common ups and downs, in general Australia's ups
are stronger and New Zealand's downs are stronger. This week, however, they
both ended down about 4% on the week, starting weak and down consistently if
relatively mildly every day.
Singapore, which shares neither of their economic profiles, shared this pattern
through Wednesday until technology equities echoed the American semiconductor
manufacturer bounce at the end of the week, so that Singapore held steady most
of Thursday and all of Friday, closing the week down only 2%.
Based on domestic sectoral profiles, one normally expects Singapore to have
more in common with Hong Kong and, based on export profiles, more in common
with Taiwan. The current week validates those expectations. Hong Kong shared
the general mild weakness through midweek, then grew increasingly stronger,
finishing Friday more or less unchanged on the week. Taiwan, however, is the
real standout, not once this week closing below its Monday open and closing
Friday up about 3% on the week.
As I mentioned last week, Taiwan has not looked back since the global crisis
threatening 11 weeks ago was averted only by the extraordinary 75 basis-point
rate cut by the US Federal Reserve before market open on January 22. At that
time, the TSEC Weighted Index dropped to 7,500 but immediately rebounded and a
bare six weeks later barreled through a resistance at 8,500.
Now in a strong up-channel, it touched 8,940 near this week's Friday midday
before settling back to close around 8,900. That means it has broken the 8,800
resistance level from last December on consistently good volume and is ready,
if the international financial environment is propitious next week, to
challenge a resistance around the 9,000 level left over from last autumn.
Shanghai, like Taiwan, is finishing Friday up about 3% from the Monday open,
but only after a much more volatile week. The Shanghai SSE Composite Index,
which 10 days ago had fallen over 42% from its mid-October 2007 high of almost
6,100, bounced by midweek up 7.3% off a support in the 3,400-3,600 range,
established in spring-summer 2007. It settled back as low as 3,350 on late on
Thursday, rising again Friday to close just below the 3,500 level. If for any
reason the 3,500 range does not hold, then the next support is at 3,000, dating
from early 2007.
After fluctuating in a range from 12,900 to 13,500 (although the ups and downs
this week were a bit more violent than the relatively tame amplitude would
suggest), the ever-interesting Nikkei 225 is closing the week almost exactly
where it began on Monday, around 13,300. This is just below the level it had
just before the aforementioned global January crisis, so next week will be the
Nikkei's week to test that. To succeed, the index will have to break through a
significant downtrend of successive tops that began in from late October 2007
and continued through December, January, and February.
This trendline will run through the 13,600-13,700 range next week, so we can
anticipate a clash between its influence and the diffuse 13,000-13,500 range of
supports. It is worth mentioning that the technical significance of the 13,700
dates back not just to January 2008 but to October 2006. However, momentum is
positive, the Bank of Japan leadership problem now looks resolved, and volume
has been at least not anemic. It is shaping up to be a crucial week for the
Tokyo market.
Finally, the Indian market continues to flounder. The BSE Sensex 30 in Mumbai
appears unable to get past the critical 15,800 level but unwilling to sink much
beneath it. Opening the week at 15,400, it looks to close around 15,900.
Established in late July 2007, this level also provided important intraday
support during the January 22 crisis, although it was breached on the downside
to 14,800 only three-and-a-half weeks ago.
Another benchmark index, the Nifty, suggests that things may turn out all
right. The Nifty has failed to penetrate its July 2007 support at 4,525 to the
downside, bouncing this week off an early Monday low and now looking to close
in the high 4,700s. But the Sensex is not out of the woods.
So the rest of the month, if not the very week ahead, will be especially
crucial for the Indian, Japanese, and Chinese indexes, all for different
reasons. If Tolstoy's saying about families applies in reverse to equity
markets, at least Charles Dickens's no less famous opening to The Tale of Two
Cities is still in force: "It was the best of times, it was the worst
of times ..."
R M Cutleris a Canadian international affairs analyst.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
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