MONTREAL - Asian equity markets headed down this week, seemingly led by
Shanghai but in fact each following its own road. The MSCI Asia Pacific Index
finished at 118.63, almost unchanged from 118.36 at the end of last week, while
the ex-Japan index closed at 389.48, down 0.6% from last week’s 391.71. And
yet, by statistical quirk, eight of the nine major indices covered in this
space had losses on the week, as old regional patterns partly reasserted
themselves but with some important differences.
The region was "led" down again by the Greater China group and by Shanghai in
particular. Shanghai, Taiwan, and Hong Kong were three of the four most
volatile exchanges on the week and the three biggest losers. The Shanghai Stock
Exchange Composite (SSEC) was off 4.1% on the week in late Friday trading local
time, down to the bottom of its 2,850-3,000 trading range at 2,851 (by the
close, declining to just below that range to 2,838) after
spending half of Thursday at its intraday low of 2,800 before recovering to
close barely within that range.
The SSEC's loss was its largest in a month and a half and was marked by less
than stellar performance of initial public offerings (IPOs). There is
speculation that the greater supply of stock coming with further expected IPOs
will continue to dilute valuations; meanwhile, sagging world commodity prices
have not been helping. The short-term technical indicators for the SSEC have
turned from somewhat favorable to somewhat unfavorable during the course of the
week.
Hong Kong's Hang Seng Index was off 3.2% on the week as of the Friday noon
break, down to 20,933 (recovering slightly to close at 21,024) after spending
the first three days of the week around 21,600 then breaking down at the
Thursday open, being unable to surmount the important resistance at that level.
This level was established throughout the first half of 2007, then confirmed in
March 2008 and again in summer of that year. Short-term technical indicators
remain on balance slightly favorable but have weakened much over the past week,
and the rate at which they are getting worse is steady, possibly slightly
accelerating.
The recent standout Taiwan Stock Exchange Composite (TSEC) joined the Greater
China group this week, being the second-most volatile index in the region and
with the third-biggest decline, closing down more than 2.3% on the week at
7,345 but still well within the up-trend channel that seems to have begun in
June.
The most interesting reversal of pattern came between the Australasian and
South/Southeast Asian groups. Australia, which shows erratic patterns and has
recently been quite strong. Likewise New Zealand, which is usually quite
uniformly docile but has recently been rather strong, was, with Australia, one
of the two least volatile exchanges in the region.
The two exchanges were notching the fourth and fifth-worst regional losses on
the week, until the Australia All Ordinaries Index rallied from 4,649 early
Friday morning to close at 4,715, up 0.4% on the week (although not matching
the weekly high of 4,741, where it closed on Wednesday). Sydney's short-term
technical indicators remain overall favorable, while Wellington's have flagged.
The New Zealand 50 Index Gross closed at 3,111 this week, down 1.42% and still
in the narrow trading range around 3,100 that it has occupied since the
beginning of August. Both exchanges were affected by continuing strengthening
in their national currencies, following on the Group of 20 resolution to
continue stimulus spending.
The northeast Asian exchanges continue to fail to distinguish themselves as
against broader Asian markets, insofar as they continue to show average
volatility and average weekly moves. This week Tokyo moved to third most
volatile after Shanghai and Taiwan (although the statistic is skewed by the
market being closed Monday through Wednesday), finishing with late Friday
weakness at 10,265, down 1.0% on the week with neutral short-term technical
indicators and influenced by a strengthening yen. Seoul closed with the week's
median loss of 0.5% at 1,691 with worsening short-term technical indicators,
even turning slightly negative.
Finally the two South/Southeast Asian markets reviewed here broke patterns
somewhat. The BSE Sensex 30 in Mumbai is at 16,783 in early afternoon Friday
local time, up 0.2% on the week, uncharacteristically on the third lowest
volatility in the region and on the cusp of an interval of resistance that
extends up to 18,000 and, depending upon definitions, even beyond. The
broader-based Nifty, by contrast, is close to challenging the midpoint of its
congruent resistance interval.
Yet the Indian markets have shown remarkable strength since the Sensex
penetrated 14,000 in mid-May and one risks gainsaying their possible future
strength, as much in the short as in the medium term. Short-term technical
indicators have weakened over the past week but remain moderately strong
overall; and there are short-, medium- and long-term supports around 16,000.
The Nifty's technical indicators are weaker than they were last week but are
still stronger than the Sensex's.
The Straits Times Index in Singapore is posting the region's largest weekly
gain, up 0.9% to 2,669 at the end of trading on Friday and challenging the top
of the trading range that it has occupied over the course of the last two
months, with weakening but still marginally positive short-term technical
indicators, possibly on the news this week that it has "officially" exited
recession earlier than expected.
All things told, the week just finished constitutes a small sneeze following
last week's hiccup. Stimulus spending is the scarf around the neck of the
financial markets by which the macroeconomic managers are trying to prevent
their national economies from catching cold because such an illness risks quick
contagion.
However, it does not seem as if anyone has thought to put on a rain-hat against
the storms threatened by a darkening horizon. The sun can still be seen
sometimes to poke through the clouds overhead.
Dr Robert M Cutler (http://www.robertcutler.org), educated at the
Massachusetts Institute of Technology and The University of Michigan, has
researched and taught at universities in the United States, Canada, France,
Switzerland, and Russia. Now senior research fellow in the Institute of
European, Russian and Eurasian Studies, Carleton University, Canada, he also
consults privately in a variety of fields.
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