MARKET RAP Bourses in holding pattern
By R M Cutler
MONTREAL - This week's action on the Asian exchanges was largely unremarkable
overall, but several exchanges made interesting moves. Taiwan and Japan were
the strongest markets and the only ones to end with a gain from the Monday
open, up respectively 1.9% and 1.4%.
Taiwan's move on Thursday accounts for all the exchange's weekly gain: it was
down steadily if unremarkably from Monday through Wednesday and continued the
fall after the Thursday open before vaulting nearly 5% from its low on the day
to close at a high that it maintained throughout Friday. Since no news can
account for this move, it appears to have been a purely technical
bounce off a support at 8,500 established in the first half of January (after
first being sketched last August).
The Nikkei, trading in a range this week between 14,125 and 14,600, appears at
least temporarily stymied by a resistance in the high 14,000s inherited from
June-July 2006 and confirmed in November 2007. Press commentary generally
blames the usual suspects - credit and inflation worries (meaning financial
sector stocks and oil prices) - but these are stories constructed after the
fact. As with Taiwan, Japan's move this week seems governed more by technical
than by fundamental considerations.
Hong Kong, Singapore, Korea and New Zealand are ending the week unchanged to
down slightly (between 0.3% and 0.8%). The last three of these were also three
of the four least-volatile indices on the week: the high-low range of the last
two was barely greater than 2%, Hong Kong barely greater than 3%. Only
Australia (All Ordinaries) was less volatile on the week, trading in an
extremely narrow range between 5,620 and 5,780.
Right now, the All Ordinaries index is trying to decide which way to break out
of wedge-shaped formation (classically called a "descending triangle") formed
by a series of descending tops since the end of last year and a
support-resistance level right at the 5,500-5,700 level dating to December
2006, with confirmations in March and August 2008.
Even the strong resource-based advance in New York on Thursday did not do much
to help resolve the dilemma of the resource-strong Australian market, which
bounced 1.5% in response at the Friday open but then gave back a third of the
hike over the course of the day. Volume in Australia all week was not very
encouraging.
The Shanghai exchange continued to move between the 3,300 and 3,500 levels this
week, as it has done for almost a month: a long-term constructive formation to
reinforce the late-April gap where the index jumped nearly 20% in the course of
barely 36 hours. In the short term, there is support at 3,300, but the Shanghai
index now has to move up resolutely before being caught in its own short-term
descending triangle. On this relatively mild week for Asia, Shanghai was even
the second-most volatile general national index, fluctuating 4.3% before
closing down 1.7% on the week, still as mentioned an overall favorable
conclusion.
It was the Indian markets that were the most remarkable. Both the Sensex and
the Nifty opened on Monday at what would be their highs for the week, rapidly
declined to end Monday with a 4.8% loss, continued the losing streak through
Thursday afternoon (down respectively a maximum of 7.5% and 7.2% on the week)
before recovering enough to look like finishing on Friday at the level of their
Monday close, still down nearly 5% on the week.
Press commentary early in the week attributed the decline to energy prices, but
neither the Sensex nor the Nifty reacted positively when oil declined in
subsequent days, and they actually rose later in the week after oil spiked up
again. So something else is at work here and, most significantly, the two
indices are confirming each other's problems for the first time in quite a
while.
In sum, the tenor of the Asian markets saw Monday as largely positive with some
neutral moves, with the major exception of the Indian markets, which were
strongly down.
Tuesday was a down day for every major equity market in the region, with New
Zealand and Hong Kong being especially hard hit. Wednesday was mixed, mainly
down for most markets but strongly up for South Korea and slightly so for Japan
and New Zealand.
Thursday was largely neutral, although strongly up for Taiwan and slightly so
for India. Finally, on Friday, the markets were tending to the best overall
closes of the week, with only Shanghai and Taiwan failing to make major gains.
Overall, even in India, the psychology is one of a holding pattern in the face
of diminished exuberance.
R M Cutler (rmc@alum.mit.edu and http://www.robertcutler.org) is a
Canadian international affairs specialist.
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