MONTREAL - The Asian equity markets were strongly positive last week, as the
MSCI Asia-Pacific Index closed up 3.6% on the previous week at 118.55, with the
ex-Japan index closing up 4.6% at 401.24.
However, the only real regularity was a generally strong performance by the
Greater China exchanges. Hong Kong's Hang Seng Index registered the greatest
overall advance, rising no less than 5.5% to close at 21,499, challenging its
short- and medium-term high established only three weeks ago but running into
strong technical resistance inherited from fluctuations during most of 2008
that put a general barrier across the chart up to 25,000.
Nevertheless, the short-term technical indicators remain favorable
and the index has continued its advance early in the present week.
The Shanghai exchange was closed for nearly two weeks for holiday, such that by
the time it closed on October 9, it had shot up 4.8% on that day alone from the
previous close on September 30, statistically making the Shanghai Stock
Exchange Composite (SSEC) the second-best performing index regularly covered
here, albeit with slightly anemic technical indicators for the short-term
future that may be likewise slightly skewed from the fact of the market's long
closure.
Taiwan, the third Greater China exchange, had a generally good week but
finished in the middle of the Asian pack, up 2.2% to 7,572 with short-term
technical indicators continuing to be strong but weakening slightly from the
recent past. The Taiwan Stock Exchange Composite (TSEC) is nevertheless making
new medium-term highs and remains in the up-trend channel it has occupied for a
number of months. Like Hong Kong, it is running into inherited long-term
technical resistance but continues to hold up well despite possibly flagging
momentum.
In Australasia, Sydney was the second-most volatile regional exchange while
Wellington returned to its regular docility and turned out least volatile
overall. The New Zealand 50 Index Gross (NZX) barely moved on the week, closing
up 0.5% to 3,163, with Thursday's action mainly responsible for that move. Yet
the NZX has been in a narrow trading range for the past three months that it
does not seem to wish to leave soon, despite the fact that its short-term
technical indicators have been growing stronger. There is medium-term
resistance in the current level up to the mid-3,300s.
The Australia All Ordinaries index rose 3.2% as the third-strongest performer
of the week, closing at 4,754 with strong near-term technical indicators but,
like several other exchanges just mentioned, momentum beginning to flag despite
recent advances, indicating that the rally may be tiring. As indicated earlier
in this space, however, the Australian index could run into the 4,900-5,000
range before encountering strong technical resistance, mainly from patterns
traced in late summer and early autumn 2008. However, the ASX 200 has nearly
hit its analogous resistance and its technical indicators are weakening faster.
Consequently, additional care is required here.
The Singapore market reverted to the Australasian type, tracing New Zealand's
pattern in particular. The Straits Times Index (STI) rose 1.8% to close at
2,653, a little below the overall weekly average, but was interestingly the
week's least volatile, beating out even New Zealand on that account.
Most of the STI's rise on the week was registered on Tuesday and Wednesday.
Also like the NZX, it has occupied a narrow trading range for the past three
months, although for the STI the next technical resistance level does not kick
in until a little over 2,800. In contrast to the NZX, on the other hand, the
STI's near-term technical indicators are weaker than average.
The BSE Sensex 30 in Mumbai closed at 16,642 on Friday and looks like making a
run at 17,000. Anything over 17,126 would be a new short-term high, but a local
maximum from May 2008 at 17,600 threatens to contain the advance. Short-term
technical indicators suggest that India is another exchange where momentum may
be declining despite continuing advances. The technical indicators for the
broader-based Nifty are worse and threatening to turn negative. The Nifty has
already once tried and failed to break through its congruent long-term
resistance from May 2008.
Finally, the Northeast Asian exchanges ranged from nondescript to lukewarm.
Seoul was the most volatile Asian exchange last week on an intraday basis as
the KOSPI closed nearly unchanged on the week, up 0.1% to 1,647, indeed the
second-worst performance in the region on the week. It mainly gained Thursday
and Friday what it had lost Monday and Tuesday. Short-term technical indicators
are improving slightly following a recent breakdown but remain less than
favorable. Traders will be watching to see whether the KOSPI closes below its
50-day moving average.
Tokyo fared better, as the Nikkei 225 closed up 2.9% to 9,857. Its short-term
technical indicators are improving but the index itself has already broken
below recent short-term highs from June and July and remains underneath the
lower bound of its August-September trading range. Caution is definitely called
for here.
To summarize, there is a general trend in favor of some continuing advance in
Asia, but momentum is flagging. At the same time, it is more necessary than
ever to differentiate among national markets, as the divergences among them are
only increasing.
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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