Of the nine major markets habitually reviewed here, only two were down more
than one day during the week (Shanghai and New Zealand), no more than two were
down on any one day (in fact, only on Thursday: Shanghai and New Zealand
again), and all major indices closed significantly up for the week usually on
increasingly stronger momentum.
The Nikkei topped the list closing up 4.9% on the week, followed closely by
Taiwan (up 4.7%), and BSE Sensex 30, which as of this writing (the Mumbai
Friday market is still open) is up 3.9%. The middle tier of advances was
occupied by Australia, Singapore, and Shanghai, all up about 2.9%; and they
were
followed by Seoul, up 1.9%, and New Zealand and Hong Kong, both up about 1.4%.
Taiwan and Australia together had two of the weakest openings on Monday-Tuesday
and strongest finishes on Thursday-Friday, but Taiwan was up more than one and
a half times the Sydney move. Moreover, Taiwan moved for a combination of
technical, political and industrial reasons (some of these a delayed response
to earlier events), while Australia was up on renewed rumors of Chinese
acquisitions of mining companies, notably BHP Billiton, which rose almost 3% to
yet another record close. (This ever-increasing direct and indirect investment
of Chinese and other Asian capital in Australia bodes well for the Australian
dollar.)
But these are not just rumors: Australia's Abra Mining is now to be bought by
Hunan Non-Ferrous, which was itself up 15%, fueling the rise of the Hang Seng,
which, although this was the weakest index on the week, followed Australian
indices in lock-step (that is, strength increasing throughout the week after
early weakness), illustrating their interconnection due to the listing of
Chinese firms in Hong Kong.
As a result, the Hang Seng was up modestly but steadily throughout the week. By
contrast, Shanghai showed little real strength despite its 2.8% rise,
demonstrating overall weakness by the end of the week and never managing to do
more than hover around the 3,600 level it reached two weeks ago after a
securities tax-reform announcement prevented it from plunging below the
critical 3,000 mark.
India, like Australia and Taiwan, started the week on uncertain footing but
gained strength throughout. The advance was fairly widespread, extending
through the banking, information-technology, raw-materials, and capital-goods
sectors. From a technical standpoint, what is important is that the BSE Sensex
30 as well as the broader-based Nifty indices remain above the supports
established by their January 22 closing levels and confirmed in late March:
4,900 for the Nifty (with additional support at 4,800), and 16,730 for the
Sensex (with additional support at 16,125). Mumbai sees them at Friday midday
about 3% over those figures - the latter at 17,380 and the former at 5,125 -
although both are down from stronger opens on the day.
Japan followed a reverse pattern, with a strong start on Monday but weakening
through the week until Friday, led down on the last days by the retail and
financial sectors, although closing up nearly 5% on the week. Yet the vast
majority of that advance had been accomplished by the close of trading on
Wednesday: a further push late on Thursday and at the Friday open was quickly
reversed for effectively no-gain over these two days.
The only good technical explanation for this hesitation would be that the
Nikkei is beginning to run up against a resistance level established in summer
2006, and this would be only the first of several layered levels of resistance.
Two other markets, Seoul and Singapore, followed a V-shaped pattern, strong at
the beginning and end of the week but slacking off in the middle. (Seoul, like
Hong Kong, was closed on Monday.) Leading Western international equities
analysts attributed Hong Kong’s weakness to a fall-off in domestic consumption
while estimating South Korea to be undervalued and likely to rise more sharply
in the event that the US economy reveals itself to be healthier than recent
indications may suggest.
To conclude. The current week is undoubtedly the strongest all year across the
board for the major Asian equity indices. What accounts for this uniformly
strong showing? As usual, there is no uniform answer, and this divergence is
reflected in the differing day-to-day patterns of the various markets. Indeed,
even the markets with the same overall patterns did not display the same
magnitudes of move, and, as explained, the reasons for their behavior are
identifiably different.
R M Cutler (rmc@alum.mit.edu)
is a Canadian specialist in international economics,
politics and finance.
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