MONTREAL - The MSCI Asia Pacific index by mid-Friday was down more than 7.5% on
the week and ready to close at its lowest level in three years. Commodity
producers led the way down. Copper, for example, which opened the week in New
York at $2.89 per pound, went under $2.63 during the week, moving back to
around $2.67 in Asia on Friday. Two weeks ago it spiked from $3.21 to $3.33 in
a single day before turning around and tumbling to its present level.
The Nikkei 225 showed the greatest loss on the week, in response to the
financial crisis and sharply declining US auto sales. By the Friday close, it
was down more than 7.7% on the week to just below 11,000, where it may find
some support given chartwork from 2004 and 2005, when it zigzagged back and
forth across that level. The outstanding significance of the Nikkei's decline
from the 18,200 top in March and July 2007 becomes
evident if set against the fact that the index has not been below 10,000 for
nearly a quarter-century.
The other relatively autonomous bellwether index, the South Korean KOSPI,
finished a shortened trading week on Thursday at just under 1,420, where it has
decent support from the first half of 2007 down to 1,330 - but these days that
could vanish in two blinks of an eye. Seoul has been slightly under the median
of Asian equity exchanges in terms of volatility, but is still off 5.5% in two
weeks. Now it is right back on the cusp of its descending-tops downtrend first
marked out in early June and mid-August, and is in a clear medium-term down
channel that began in July. Still, it is better off than the Nikkei, which was
at 13,000 at the beginning of September, when its own current down channel
began - one that is much steeper than the KOSPI's.
In Singapore, the Straits Times Index is, like last week, one of the most
volatile in the region and also one taking the hardest knocks, falling 8.5% now
in two weeks. By Friday afternoon it was at 2,305, having broken strong
long-term supports at 2,500 dating from 1994, 1996, and 2000; still, there is a
band of resistance below that level stretching to 2,000-2,100 from multiple
intervals. The STI spent all but 20 months of the seven-and-a-half years
between July 1993 and February 2001 oscillating between 2,000 and 2,500. Below
2,000, support kicks in only at 1,650-1,700 and again (more strongly) at 1,500.
Mumbai's BSE Sensex 30 opened Friday in the 12,800s, down 2.1% on the
week after being the third-biggest loser the week before with a fall of 4.5%.
The index has now definitely broken below its 13,100 support and may well
decide to descend to 12,400 to check whether that support, from May 2006 and
March 2007, will hold. By 2pm Friday it was at 12,679.
The withdrawal of foreign funds from the Indian equity markets over the past
months has hurt. These account for only about 20% of all capital available to
purchase shares, but they are the extra punch that drove the Sensex to 20,800
at the beginning of the present calendar year. How long ago that seems.
Of the remaining exchanges, it would be an omission not to note that Shanghai
has been closed all week but that this did not prevent Taiwan and Hong Kong
from being two of the biggest three losers. Taiwan's 5.8% decline this
week leaves it at 5,742, resting on three separate supports from three separate
formations between 5,400 and 5,740 established between August 2004 and October
2005. The next support down after these is from early 2003 at 5,050.
The resource-heavy Australian market also deserves comment, particularly with
the All Ordinaries index being the third-biggest loser, down 4.8% on the week
and closing at 4,701. This means that the index failed to punch through its
descending-tops downtrend marked out in mid-May and early September, a
formation remarkably congruent with the KOSPI but with different timing. This
also puts it outside the 4,800-5,200 band that had held it in a web of
resistances and supports since early July. The next supports are at 4,600 (from
late 2006) and 4,200 (from mid-2005), but they do not look extremely strong.
Finally, Wellington lived up to its tradition of being the least-volatile and
least-negative of the nine exchanges surveyed in this space, but this has been
little help of late. The NZX 50 Index Gross was down only 1.1% on the week,
equaling last week's performance, and which in the current skewed
circumstances made it the best of the lot. Nevertheless, this brings it down to
3,151, respecting its descending-tops trendline beginning mid-October 2007 and
challenging its short-term low from early July this year, supported from a
local maximum formed in February 2005 but below which the next support is only
in the low 2,900s.
All in all, this has been the worst week for Asian equity markets since
mid-August 2007, when credit markets first reacted against mortgage defaults in
the US by cutting lending.
R M Cutler is a Canadian international affairs specialist.
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