MONTREAL - Asian markets advanced strongly last week as the MSCI Asia Pacific
Index advanced four days out of five to finish up 1.2% to 120.33. A
below-average performance in Shanghai and Hong Kong may account for the MSCI's
relatively restrained showing compared with the nine exchanges surveyed here,
which showed a mean advance of just under 2% and a median advance of 2.4%.
Press commentary attributes the shift in sentiment to better-than-expected US
employment data (taken to imply an economic recovery that will drive Asian
exports) and the hope that concerns for the euro arising from the Greek
financial crisis will be resolved. Nevertheless, as will be seen in the
commentaries on particular national indexes below, this impetus does not yet
mean anything by technical medium-term measures. The MSCI index is still well
within its eight-month, relatively narrow trading range between 114 and 127.
There was a high degree of intra-regional variation last week. For example, the
Greater China exchanges were two of the three most volatile but also two of the
three biggest losers. An appetite for risk has returned and appears to have
rotated out of Shanghai, which lost 0.7% on the week to 3,031, closing below
its 200-day moving average 10 points higher (with the 50-day moving average at
3,100). The index is coming off a short-term oversold situation with neutral
forward-looking indicators.
Hong Kong was the second-worst performer in the region, but the Hang Seng Index
still gained 0.9% to close at 20,788, only 160 points below its 50-day moving
average (with the 200-day moving average at 19,550) and favorable short-term
indicators on increasing volume. The big winner in the China region was Taiwan,
which gained 3.1% to 7,666 on increasingly favorable short-term indicators. The
market here is looking at strong medium-term resistance just under 7,800.
The only performances close to being "typical" last week were those of the
Northeast Asian exchanges: Japan and South Korea were fairly average in both
volatility and overall movement, as is most often the case with this subregion,
even though Seoul was the second-least volatile in all of Asia. Gains by the
KOSPI and the Nikkei 225 were right in the middle of the pack - the former rose
2.5% last week, while the Japanese benchmark was up 2.4%
The KOSPI closed at 1,634, only 10 points below its 200-day moving average
(with the 50-day moving average at 1,557). However, it is still well within its
medium-term 1,570-1,720 trading range. The Nikkei’s close at 10,369 was only 40
points below its 200-day moving average (with the 50-day moving average at
9,876), and equally well within its own analogous medium-term trading range.
Both indexes nevertheless have favorable short-term technical indicators.
There was, however, large variation within the Australasian region. One of its
exchanges was the least volatile and the other was the third-biggest gainer.
The Australia All Ordinaries Index gained 2.6% to close at 4,773, breaking
through its 200-day moving average to the upside on continuing positive
short-term indicators, despite looking oversold, yet still within its
medium-term trading range from 4,500 to 5,000.
The New Zealand 50 Index Gross was true to form as the least volatile among the
nine markets surveyed here, but it gained an uncharacteristically high 1.9% to
close at 3,214, still within its own medium-term trading range from 3,060 to
3,310 but with strong short-term technical indicators even in a technically
oversold condition.
The Straits Times Index in Singapore, after several weeks of running with the
Indian markets, last week alternated back to a closer imitation of the
Australasian markets, gaining “only” 1.4% to close at 2,790, just under its
50-day moving average at 2,811 (with a 200-day moving average at 2,635).
The other South/Southeast Asian index was the headline winner of the week. Of
course this refers to the Indian markets. Last week, the BSE Sensex 30 rose
3.4% to close at 16,995, breaking definitely through its 200-day moving average
at 16,803 with the 50-day moving average far behind. Its associated medium-term
trading range is 15,400-17,700 and the index has strong short-term technical
indicators despite some indications of being oversold. As 4,891, however, the
broader-based Nifty has not yet penetrated its respective 200-day moving
average, which on Friday found itself at the 5,076 level.
For some time, I have pointed out that the Asian indexes have been vacillating
between their 50-day and 200-day moving averages. We now see that a couple of
them are poking up and maybe even through whichever of the two is the higher on
their charts. Yet all of these averages are firmly ensconced within their
medium-term trading ranges of at least five to six, and sometimes up to eight,
months long. India is a possible exception, although we will have to watch to
see whether the Nifty moves to confirm the Sensex's recent impetus.
None of this precludes continuing firm moves through much of Asia on the basis
of increased appetite for risk and strong momentum, until these various indexes
reach the top of the aforesaid trading ranges. In the time it may take to
achieve those levels, new elements will have appeared driving market
psychology.
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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