MARKET RAP Appearances can be deceiving
By R M Cutler
MONTREAL - The second-most volatile week in some time (last week being the most
volatile) led Asian exchanges to trim their losses late in the period,
exhibiting a wide range of outcomes despite some common trends.
The MSCI Asia-Pacific Index finished the week down 1.5% to 114.71, while its
ex-Japan version was down slightly under 1.0% to 389.26. In general, overall
solid gains on Wednesday and Friday largely mollified losses on the other three
days of the week, although outcomes ranged from over a 6% gain by the Shanghai
Stock Exchange Composite (SSEC) to over a 3% loss by the Nikkei 225. All other
exchanges ranged between a loss of 1% and a gain of 2%.
Two weeks ago, I said that in the absence of good performance in
Shanghai, the region as a whole would drag, and that was what happened dragged
during the week ending October 30 in the absence of such a move in China.
This week, Shanghai led strongly with gains every day following a reversal in
trend of its short-term technical indicators on Tuesday, so that by
mid-afternoon Friday local time it had attained the 3,181 level, where it has
minor resistance to the upside. The index closed the day at 3,164.
Other Greater China exchanges shared in the advance. The Hang Seng Index in
Hong Kong closed the week at 21,867, up little more than 0.4% from last
Friday's close with short-term technicals actually unchanged from last week's
neutral-to-negative reading. The Taiwan Stock Exchange Composite (TSEC)
rebounded off the level of the close last week at 7,340 thanks to support from
May 2006, March 2007, and January and August 2008.
On Tuesday, the TSEC hit an intraday low for the week at 7,219 but never closed
below 7,335; overall volume was relatively light throughout the week. The three
Greater Chinese exchanges were three of the four most volatile and also three
of the four best performers this week.
The Australasian indices exhibited slightly less than average volatility and
were two of the three worst performers on the week, actually closing in
negative territory due to significant losses on Monday and Thursday. The
Australia All Ordinaries Index continued its decline from its intraday high of
4,880 on October 16 to finish at 4,604, down 0.9% on the week with still bad
short-term technical indicators albeit with some improvement in these.
The Australian index has some minor support at the present juncture, which
could become critical inasmuch the next support underneath does not appear
until the mid-4,200s. The New Zealand 50 Index Gross (NZX) was down 1.8%, a big
move for this usually docile index, closing at 3,161 still with negative
short-term technical indicators.
Singapore's Straits Times Index (STI) switched back from the Australasian to
the South/Southeast Asian pattern this week, closing at 2,665 on Friday, up
0.5% on the week but actually with worse short-term technical indicators than a
week ago. Mumbai's BSE Sensex 30 was hovering around 16,157 by midday Friday
local time, up 0.7% on the week thanks to a very strong Wednesday following a
Tuesday intraday low near 15,330.
That level instantiated supports sketched in March 2007, confirmed in late
summer of that same year, and activated once more in June of the current year.
The Sensex's short-term technical indicators have improved but are still on
balance slightly negative; the rate of change, however, is positive.
Finally, in Northeast Asia, Seoul was lackluster while Tokyo showed the
region's worst performance of the week. The South Korean KOSPI closed at 1,573,
down 0.7% but with two strong up days and two strong down days on the week; its
volatility was more or less average this week, while its short-term technical
indicators were largely unchanged from last week, meaning that they were
neutral to slightly favorable.
The Nikkei 225 outpaced all other losers this week to close down 3.2% to 9,782
on the region's lowest volatility. The Japanese market was closed on Tuesday
and the index notched its losses mainly on Monday and Thursday.
Overall, then, it was a good performance for Asia this week despite a somewhat
dismal start. The question becomes whether the generalized recovery on Friday
is merely a technical bounce or presages further advances. The answer to this
question will vary across national exchanges. It is not to be forgotten that
both the relevant MSCI indices actually finished the week down over 1%.
Generalized advances across the region were in evidence not only on Friday but
also on Wednesday; yet if we take away Shanghai and Tokyo, then we really end
up with a somewhat nondescript week.
What is significant is that the SSEC's advance was not shared so widely as one
might have thought it could be. Local observers attribute this to the
psychological effect in China of the launch of new issues, as their being
chased and bid up was a rather parochial phenomenon. It was not generally
shared even across the other two Greater China exchanges. Hong Kong did not
rise strongly in sympathy, and Taiwan's advance is just as likely due to its
own internal dynamics and not to action in Shanghai.
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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