MONTREAL - For the first time in a while, Asian stocks this week exhibited a
common pattern. A neutral Monday and a Friday recovery bracketed three losing
days in the middle of the week.
The MSCI Asia-Pacific Index, which finished the week down almost 4.1% at
114.68, and its ex-Japan version, which closed down 5.6% to 388.99, give the
general idea. Overall volatility was greater than it has been for some time,
especially on the weekly basis, but also on the intra-day basis.
Generalizations can be hazardous and it is still necessary to examine each
national market on its own terms: all the more so,
since none of the various sub-regions exhibited any internal homogeneity that
would specifically differentiate it from the general trend.
For example, the Australian All Ordinaries Index was the week's worst loser,
down 4.3% to 4,652, but the New Zealand 50 Index Gross (NZX) was the week's
only winner, although just barely, closing Friday up 0.02% from the week before
at 3,217.
The Australian index thus confirmed my observation repeated over the past
several weeks that the 4,900-5,000 interval would mark the upper range of its
short-term advance. That occurred on October 16, when the index's intra-day
high touched 4,880; it did not return to challenge the level.
Its short-term technical indicators, which I said last week were weakening,
turned definitely negative on Tuesday. The NZX, which had the best short-term
technical indicators at the end of last week, strengthened so as to close
basically unchanged, but these short-term indicators have during the current
week deteriorated to neutral.
Singapore's Straits Times Index (STI) this week rejoined the pattern of the
Australasian group, insofar as one may be said to have existed, or rather
specifically the NZX. While Wellington was the least volatile and best
performer on the week, Singapore was the second least volatile and second best
(or second least bad) performer. In mid-afternoon Friday local time, the STI
was down 1.8% to 2,668. However, its short-term technical indicators also
deteriorated throughout the week and are now slightly negative.
The other South/Southeast Asian market noted here, besides Singapore, is India.
As of late morning Friday local time, the BSE Sensex 30 is the third worst
performer on the week, down 3.3% to 16,263. Last week, I pointed out that its
short-term technicals were deteriorating after it topped that Tuesday against
significant resistance inherited from the 2008 chart. The index may snap back
briefly throughout the rest of the day Friday and even continue the rebound
through the early part of next week. However, its short-term technical
indicators have still continued to worsen throughout the current week.
The Greater China indices exhibited some mild intra-regional cohesion, as
Taiwan and Shanghai marked two of the three worst losses on the week while Hong
Kong and Shanghai shared the most average weekly volatility. It is not at all
clear, however, that generalizations about the sub-region flow from this
partial appearance of common short-term trend.
The Taiwan Stock Exchange Composite (TSEC) notched a loss of 4.0%, the most
outside of Australia, to close at 7,340 on the week. This means that it has
penetrated to the downside the trading range from 7,400 to 8,500 that it
occupied from the end of November 2007 through the end of March 2008.
There is support at this level of the chart from May 2006, March 2007, and
January and August 2008. Nevertheless, short-term technical indicators, which
began deteriorating a week-and-a-half ago and turned neutral early in the week,
have now accelerated their negative slide. A decline to 7,100 or a bit lower
may well be in the cards.
The Shanghai Stock Exchange Composite (SSEC) continues to hover around 3,000
level without deciding on which side of this crucial level it finally wants to
land. It eventually closed the week at just above 2,995 down a little more than
3.1% on the week. Its short-term technical indicators have been worsening
throughout the week. Meanwhile, the Hang Seng Index in Hong Kong is down almost
exactly the same amount at the midday break, touching 21,901, before closing at
21,820, with short-term indicators having broken negative on Tuesday.
There is little to say about the Seoul and Tokyo markets, other than that the
KOSPI was the fourth most volatile and fourth best performing index in the
region, while the Nikkei 225 was the third least volatile and third worst
performing. The KOSPI closed out the week at 1,581, down 3.2%, with short-term
technicals turning neutral to slightly negative late in the week, while the
Nikkei finished down 2.6% to 10,035 with similar technicals.
Last week, I said that if Shanghai did not lead a strong charge, then the rest
of the indices would generally weaken. This is what has happened. The MSCI
Asia-Pacific ex-Japan Index has not even tried over the past two weeks to
challenge the resistances to which I pointed in mid-October beginning at the
414 level. Last week, many of the indices already had short-term negative
technical indicators. Most of the indices that last week exhibited neutral or
deteriorating short-term technicals have now turned negative.
After a week like this one, it is possible that there will be a few days of
consolidation: Friday is probably the first such. Yet to the degree that it is
possible to generalize across Asian equity markets, it is possible to say that
such consolation would only set the stage for further, more or less
generalized, subsequent declines.
Dr Robert M Cutler (http://www.robertcutler.org), was educated at
the Massachusetts Institute of Technology and the University of Michigan, and
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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