MARKET RAP
Asia stops to catch its breath
By R M Cutler
MONTREAL - Last week's Asian equity markets were overall nearly neutral, with
some significant national exceptions, the MSCI Asia-Pacific Index closed at
119.2 on Friday, nearly unchanged from the previous week's 119.6, as the
ex-Japan index finished at 406.91, down barely more than one-half of 0.1% from
409.32 last week.
All markets in the region were set to close the week within 0.9% of last
Friday's close, with the significant exceptions of Shanghai (up 4.7% on the
week at mid-afternoon Friday local time), Hong Kong (up 2.8%), and India (down
2.2% at mid-morning Friday local time but subject to modification as this
exchange was the most volatile on the week).
The Greater China group of markets and the Australasia group
were the only ones to exhibit any sub-regional homogeneity. As already
remarked, the Shanghai Stock Exchange Composite (SSEC) and Hong Kong's Hang
Seng Index were the two best gainers on the week, but the Taiwan Stock Exchange
Composite (TSEC) was the second-worst, down 0.9% to 7,649.
The SSEC, at 3,108 in mid-afternoon Friday local time, is looking to close
above its short-term high from September 17 of 3,060. If it succeeds in this
and holds the level, then it may decide to take another run at the medium-term
high of 3,471 from August 9. Resistances along the way are at 3,140 and 3,264.
Short-term technical indicators remain quite favorable.
The Hang Seng also has favorable short-term indicators but needs to keep its
advance or they will soon turn less favorable. It has surmounted the first
level of resistance to which I pointed last week, but at 22,538 is still
confronting a terrace of resistances higher up. The first of these kicks in at
23,124. After that it is a hard climb to 25,000, from where another interval of
resistance extends up to the 25,600 level.
The TSEC has hit the resistance from January 2008 to which I pointed earlier.
Its short-term technical indicators have markedly deteriorated in the past
week, and it is also running up against a long-term descending-tops trend line.
It may move sideways for a while before deciding what to do. There are good
short-term supports in the mid-7,100s.
Singapore, which sometimes follows Mumbai and sometimes not, reverted to the
Australasian pattern this week. The Straits Times Index (STI), Australia All
Ordinaries Index, and New Zealand 50 Index Gross (NZX) were clumped together as
the most average-performing indices of the week. Singapore also followed Sydney
as the two tied for least volatile index. Wellington's volatility was
uncharacteristically average for Asia; usually it is down among the least
volatile with Sydney.
At 2,711 in the early afternoon local time, the STI was up 0.3% on the week
with deteriorating but still slightly positive short-term technical indicators.
The resolution of this situation will be significant, as the index is not only
fighting to stay above its 50-day simple moving average but also at the top of
its three-month trading range. Strong medium-term resistance is at 2,833 if it
succeeds in breaking through.
The Australia All Ordinaries closed at 4,860, up 0.4% on the week, still with
decent but weakening short-term technical indicators, and hesitating more and
more as it approaches the 4,900-5,000 resistance interval to which I pointed
last week. The NZX closed up 0.2% at 3,215 on suddenly weak short-term
technicals as it failed to follow through on the short-term high that it
notched Tuesday at 3,253. This would appear to confirm the perseverance of a
long-term resistance at that level, first touched in March 2005, then confirmed
in November of that year, then reconfirmed in summer-autumn 2008. Should the
NZX succeed in breaking through, then the 3,400 level presents another major
long-term resistance confirmed in the recent medium term.
The Northeast Asian exchanges participated in this week's statistical oddity in
their own odd manner. Seoul's KOSPI was the region's third most volatile and
third-worst performance; Tokyo's Nikkei 225 was the region's third-least
volatile and third-best performer. The South Korean market closed up barely
0.1% to 1,640, still tracing its 50-day simple moving average and undecided
which was to go. The KOSPI's short-term technical indicators have markedly
worsened over the last two weeks but at its current level it is supported by
medium-term chart formations from August 2007, February and March 2008
(separately) and again July 2008. The KOSPI too may move sideways for a while
as it decides whether to make one more move up before consolidating.
The Nikkei's short-term technicals are schizophrenic: some very good, some very
bad. It is noteworthy that this index is also tracing its 50-day simple moving
average while deciding which way to flip. Also it is up against a long-term
resistance inherited from 2001-02. The highest level of its three-month trading
range is 10,493. This week it closed up 0.2% at 10,283.
Finally in Mumbai, the BSE Sensex 30's short-term technicals have deteriorated
markedly this past week. Its three-month trading range topped on Tuesday at
17,223 (intraday high 17,455), about where there is significant resistance from
multiple tops from the first quarter of 2008 extending up into the low 18,000s.
As of midday Friday local time, it is at 16,948, down 2.2% on the week after
having been closed on Monday.
To conclude, important exchanges from all sub-regions (Taiwan, South Korea,
Singapore, Australia, Japan) have experienced deteriorating technicals and/or
hesitations near the top of short-term trading ranges and tracing their 50-day
simple moving averages. We could even add New Zealand and India to this list.
It is important to emphasize, however, that there is no single pattern that all
these markets are following even though they find themselves in analogous
short-term conjunctures. This does not mean that they share medium- or
long-term patterns; indeed, they do not.
We could even add that Hong Kong may soon be joining the others' indecision.
The only exception is Shanghai, by far the biggest gainer on the week and still
with decent technicals and, if it chooses, a clear field to charge back up and
test the high 3,400s. Whether this would have knock-on effects on any of the
other Asian exchanges, even if it occurred, would remain to be seen.
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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