MONTREAL - Well, I exaggerate, a little. Like last week on the Asian equity
markets, the past five days were relatively calm with the exception of Shanghai
- until Friday, when the wave hit from Thursday's 3% decline on Wall Street.
Even putting Friday aside, the Asian exchanges this week barely oscillated 1.1%
Monday through Thursday, and rarely more than that on a daily basis: again with
the exception of Shanghai, the most volatile exchange, but joined this week by
Taiwan and Hong Kong in second and fourth places. (Mumbai looks like coming
third.)
Thus three exchanges of so-called Greater China are one of the
major stories again this week, as Shanghai is holding its place as the most
volatile in Asia, with Taiwan second, and the other Greater China exchange,
Hong Kong, fourth. Still, it could have been nastier. Shanghai's high-low swing
on the week through midday Friday was "only" 6.75% of last Friday's close,
whereas last week it swung up 5.2% on Wednesday alone and then down 6.6% in
Thursday's trading. Even so, Shanghai was the most volatile this past Monday
and Wednesday and looks to be so again on Friday.
Taiwan took the honors on Tuesday, with Shanghai coming in second. Yet despite
all the turbulence, Taiwan is the only exchange in Asia to close the week
significantly above its Friday open, this thanks to a moderately strong support
established in late January in the 7,500-7,500 range. It finished the week just
below 7,550.
The Shanghai Composite Index has still not penetrated back up through the
highly important 3,000 level that marks the beginning of the bottom of the gap
from the third week of April. The index tried twice last week and again twice
this week to push through under great momentum but has come up short again. It
was making some progress up into the low 2,900s on Wednesday and Thursday, but
then the effects from New York's Thursday hit Asia. It is off nearly 4.4% on
Friday alone, and looking to close down over 2% on the week in the high 2,700s.
Things could be worse, but not much. If it breaks 2,600 on the downside, then
it will have entirely exhausted supports established in early 2007 during the
second half of its phenomenal 22-month run from 1,100 to 6,000 that ended last
October. Next up (or rather, down) after 2,600 is the 2,100-2,200 level, where
some technical supports were established in late 2000 and early 2001.
For what it is worth, however, Taiwan (down 4.7% on the week as of Friday
mid-session) and Hong Kong (down 3.4%), as well as Seoul (down 3.5%), look like
beating Shanghai for the largest percentage losses on the week.
Mumbai, meanwhile, opened Friday already down 4.4% on the week at 13,900, just
below its own critical 14,000 threshold, established in December 2006 and
reaffirmed in early 2007 and, crucially, August 2007 as well. As of noon local
time, the BSE Sensex had declined further to the low 13,800s. This is crucial,
because after the high 13,900s, the BSE Sensex 30 has only a rather minor
support at 13,400 to lean on before encountering better footing at about 12,600
(established March-May 2007).
Even at its present level, the Sensex is now down fully one-third from its
all-time high established a scant five and a half months ago. In fact, the
Sensex since early 2007 is starting now to look like a classic
head-and-shoulders formation. This would mean that the downside continues to be
favored. The Nifty confirms this general trend with proportional support
levels, although it does not show the more recent head-and-shoulders pattern so
clearly.
This week the Australian All Ordinaries index broke down through its late-2006
support at 5,410, not yet definitively even though down to 5,340, but needs to
find acceleration fast if it does not wish to remain there. Other exchanges
follow the same pattern, with idiosyncratic differences. Seoul, for example,
broke below its 1,720 support to just over 1,680, but has further supports down
around 1,600. However, these are only relatively recently established - earlier
this year in fact - and after that, there is nothing until the mid-1400s.
In contrast to Shanghai and Mumbai, however, the KOSPI in Seoul is down only
21.5% from its late-2007 all-time high; Singapore only a little more, at 23.5%
down from last mid-October; and the Nikkei 225, barely 26% down. We have not
heard much lately about the possible decoupling of Asian markets from North
America's, but these three seem to represent a group, and there does seem to be
a bifurcation in the turbulence.
Australia, too, is down "only" 22% from late October; by contrast Hong Kong,
for example, is closer to the Mumbai-Shanghai proportion. Such a bifurcation
signifies that we should not expect the oscillations of these different major
patterns in Asia, which manifest across several exchanges, to harmonize with
one another in any significant way.
R M Cutler (rmc@alum.mit.edu) is a Canadian international affairs
specialist.
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