MONTREAL - This week in the Asian region there was a somewhat inverse
correlation between market volatility and market movement, mostly accounted for
by the Greater China indexes, where Hong Kong and Shanghai were the two most
volatile but the two biggest losers and Taiwan was the third-least volatile but
the second-biggest gainer.
The Taiwan Stock Exchange Composite (TSEC) was
the best performer on two days of the week and second-best on two
more, closing on Friday at 7,795, up more than 1.5% from the week-earlier close. On Monday it gapped up
at the open to over 7,700, looking back below that level only on Thursday. This
is a favorable breakthrough, volume is increasing, and the short-term technical
indicators remain positive.
By contrast, the Shanghai Stock Exchange Composite (SSEC) was down 1.7% on the
week at 3,260 as of late morning Friday local
time
before dropping a few more points to end the week
at
3,247. On Monday and Tuesday it sustained closes above the critical 3,300 level
but, after being closed Wednesday, gapped down at the open Thursday and never
touched that level from the downside for the rest of the week. The overall
technical indicators are still on the favorable side for the short term, but
this index has not yet conquered the top of its recent trading range.
The Hang Seng Index (HSI) in Hong Kong was the week's most volatile
and biggest loser, down about 2% on the week to 21,902 by Friday's close and
showing short-term weakness in its technical indicators.
In
the Northeast Asian sub-region, the South Korean and Japanese exchanges continued
their strong advances of recent weeks. Only the third- and fourth-most
volatile on the current week, they were the best and fourth-best performers.
Seoul's KOSPI was the week's standout, up about 2.3% to 1,656 and showing
good strength throughout the week on steadily increasing volume but showing
signs of being overbought in the short term.
The
Nikkei 225 in Tokyo was up by around 0.5%
on the week near Friday's close local time, to 10,074, before a final flourish took it
to 10,107, its high for the week, but still stuck within the trading range
noted here last week and with favorable but less than outstanding short-term
technical indicators.
Australia and New Zealand remained in their recent doldrums. Wellington
conformed "to type" as the least volatile exchange of the week, also falling
0.6% to 3,128, well within its recent trading range and with nondescript
short-term technical indicators. Sydney fell 1.5% to 4,651, likewise within the
trading range noted last week
The Straits Times Index (STI) in Singapore, which sometimes follows the
Australasian pattern and sometimes the South Asian pattern, this week continued
its recent trend of tracing the former. As of Friday mid-afternoon local time,
it was up 0.2% on the week to 2,796, near the top of a month-long trading range
after having broken out to the upside from a previous trading range analogous
to the one that some other exchanges continue to occupy. Volume in Singapore
has flagged a bit lately, but otherwise the technical indicators remain on
balance favorable.
The Indian exchange remains among the most interesting. Last week, I wrote that
the BSE Sensex 30 had "failed already once [in mid-October] to punch through
the mid-17,300s [and looks] a bit overbought … with … diminishing momentum
[while] volume has fallen off over time."
This week it churned between 16,940 and 17,240 before gapping up at the open on
Friday in another attempt to penetrate through the mid-17,300s. This attempt
failed just after noon local time as it dropped from its high at 17,351 to
17,100 in under a quarter of an hour, thereafter oscillating throughout the
local lunch hour between that level and 17,200, looking more overbought than
oversold by technical measures and losing momentum on decreasing volume.
To summarize, Shanghai is still near the top of its trading range but has not
shown definite signs of breaking through to the upside, while Taiwan indicates
very good strength with perhaps the strongest advance in the region as a whole.
Hong Kong is still stuck in its trading range with the least momentum of all
three.
In Australasia, Wellington and Sydney are both mired in their trading ranges
with little or no momentum despite the recent strength of their respective
national currencies. In Northeast Asia, Tokyo remains in its trading range
despite recent relative strength while Seoul may be gearing for a breakout to
the upside. Singapore is not yet flagging, whereas India appears to be.
Once again, it proves difficult to generalize even within geographical
sub-regions, let alone across Asia as a whole. Taiwan, South Korea, and
Singapore are the ones to watch in that order, while others are focusing their
attention on Shanghai and Mumbai; of the latter two, Shanghai has the better
chance for an upside breakout.
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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