MONTREAL - Asian markets started the year in party mode, with the MSCI
Asia-Pacific Index gaining 2.3% this week, to at 123.33, by late in Friday
trading, with the ex-Japan index up an equivalent amount at 426.22.
These moves look like possible breakouts from recent medium-term trading
ranges, although caution is required since they may be heralding only a
long-term last gasp before a substantial correction prepares the ground for
subsequent longer-term advances.
This week, the usually stable and unremarkable New Zealand exchange led all
Asian equity markets, rising 2.5% to close at 3,310, its highest level since
mid-September 2008, as hopes
emerged for a consumer-driven recovery on the rather fragile basis of increased
worldwide holiday sales by the specialty jewel retailer Michael Hill.
Wellington is up 6.3% since mid-December.
The Australia All Ordinaries Index is up almost as much, 5.4% in the same
period, although only 1.2% this week, closing at 4,942, likewise its highest
level in 16 months. Sydney's short-term technical indicators are strong, as are
Wellington's. While New Zealand's strength is more puzzling, if it is not
simply moving in tandem with Australia, the latter's move this week can be
accounted for by profit-taking on the Australian dollar's recent strength and
the rise in Chinese prices for iron ore to a 13-month high based on demand from
steel-makers.
The three Greater Chinese exchanges were second through fourth most volatile
this week, but their absolute performances were extremely disparate, ranging
from the rise by Hong Kong's Hang Seng Index of 1.7% (third-best of the week in
Asia) to 22,233, to the decline in the Shanghai Stock Exchange Composite (SSEC)
to 3,176 - the only exchange to lose ground on the week.
Between these two extremes, the robust Taiwan Stock Exchange Composite added
1.1% to close at 8,281 after hitting an intraday high of 8,340 on Thursday.
The SSEC was Asia's biggest loser on four of the five days this week. Press
reports attribute the decline in Shanghai to the start of a rollback by the
country's central bank of the monetary stimulus that has driven its recent
recovery, in particular the easy-money policy that has created the danger of
asset-price inflation. Raw materials suppliers accordingly led the way down.
Bloomberg News reports that Chinese officials, in addition to imposing higher
rates and an increase in banks' reserve ratio, are projected to allow the yuan
to appreciate this year after preventing gains since July 2008. The SSEC still
has overall favorable short-term technical indicators, but it has slipped back
to well within its four-month trading range and volume is unremarkable.
Insofar as the Shanghai exchange is taken as a barometer of appetite for risk
by international investors, the move this week may betray a move to
risk-aversion on their part; if so, then we should expect other Asian exchanges
to moderate their advances in the near future.
The Tokyo exchange was Asia's second-best gainer this week after Wellington.
The Nikkei 225 rose 2.4% to 10,798 on moderate volatility. Like some other
Asian exchanges, this represents a penetration upwards through the top of its
recent trading range, although less definitively than for other markets. The
resistance may not yet be definitively cleared, especially insofar as
short-term technical indicators show a loss of strength and momentum.
The other Northeast Asian exchange, in Seoul, diverged from Tokyo's
performance. South Korea's KOSPI was the region's second-worst performer this
week, although the overall strength in Asia meant that it could still notch a
gain of 0.7% to close at 1,695. It failed to penetrate the top of its recent
trading range (marked by the close last September 22 at 1,719). Short-term
technical indicators are favorable but only marginally so. This pattern may
require more time for consolidation, even if only sideways, before another push
further up is attempted.
The BSE Sensex 30 in Mumbai is at 17,614 at noon local time Friday, up 0.8% on
the week after falling from its weekly intraday high of 17,750 reached at the
Wednesday open. This penetration of its October 22 close seems finally to
confirm a similar penetration just before Christmas by the broader-based Nifty
index, although there is significant evidence that it is overbought while
paradoxically other short-term technical indicators are on balance favorable.
To conclude, the Straits Times Index (STI) in Singapore this week did not
follow the Australasian pattern to which it has lately been partial. Rather
than showing the significant strength characteristic of Wellington and Sydney,
it partook somewhat of Mumbai's pattern, finishing up 0.7% to 2,923, indeed
accelerating its recent rise while showing short-term indications of being
overbought even as medium-term indicators are less heated.
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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