MONTREAL - Asian equities rose for the fourth consecutive week over the past
five days as the MSCI Asia Pacific Index reached 124.78 in early afternoon
Tokyo time Friday, up 1.3% since last week’s close. The ex-Japan version of the
same index, not far from the recovery high of 126.77 reached just over two
months ago.
The MSCI Asia Pacific Index has been in a trading range between that level and
114.19 since the beginning of September, but it has been technically overbought
since the end of last month with erratic volume.
The various national exchanges reviewed here began to conform more closely to
their typically characteristic behaviors, but the
rank-order correlation between volatility and change was a moderate plus 0.48.
The sub-region that behaved most typically to character was Australasia.
Northeast Asia was also relatively typical in the aggregate but displayed a
relatively high internal variance.
The Greater China exchanges were semi-typical as to volatility but showed no
general pattern as regards absolute movement. Finally, South/Southeast Asia was
erratic, as Singapore conformed more to Mumbai than to Australasia but also the
Indian markets display no relative consistency.
Australia and New Zealand were the two least volatile markets in the region.
New Zealand notched the smallest gain, as the NZX index rose 0.2% to 3,230 but
with short-term technical indicators turning much weaker as from Wednesday
despite the Friday recovery that accounted for the week's entire gain. The
Australian All Ordinaries Index recorded an average-for-the-week gain of 1.2%
to reach 4,890, and still showing short-term technical strength although that
had weakened earlier in the week.
Volume was increasing throughout the week in Sydney despite a technically
overbought situation. This index has already broken through a series of
medium-term resistances from last October and is soon up against the short-term
resistances in the low 4,900s and the 2,981 local maximum established on
January 11.
South Korea and Japan conformed to Northeast Asian type as average performers
although there was a good deal of difference between them individually. Seoul
was the third-most volatile and fourth-best performer, while Tokyo came seventh
in each ranking.
The Nikkei 225 was overbought earlier in the week but corrected that situation
although volume has not changed much. It rose 0.7% to close at 10,824.
Short-term technical indicators remain generally favorable although the average
looks ready to challenge its resistance at 10,982, the level established on
January 15 and its highest point since October 2008.
In Seoul, the KOSPI rose 1.5% on the week to 1,697, also with favorable
short-term indicators although technically a bit overbought. It is ready to
challenge its resistance in the low 1,710s, which is significant both in the
short-term chart (January 21) and in the medium-term chart (September 22,
2009), as well as in the long-term chart (August 2007 and February 2008). This
may be one bellwether, not necessarily definitive but indicative, for the
near-term future of Asian stocks as a whole. Of course, it would not be enough
for the KOSPI simply to close above the given level, but rather such a close
would require subsequent confirmation.
The Shanghai Stock Exchange Composite (SSEC) showed late strength on Friday
after the midday break and rose from below 3,040 to close at 3,068, up 1.8% on
the week with neutral short-term indicators. Although this rise made it the
third-best gainer on the week, only slightly outpaced by Taiwan, nevertheless
the Hang Sang Index in Hong Kong was the week's second-worst performer, gaining
only 0.6% to 21,340, albeit still with favorable short-term technical
indicators and still well inside its medium-term trading range.
The Taiwan Stock Exchange Composite (TSEC) gapped up at the Wednesday open and
never looked back, to close at 7,898, up 1.9% on the week but with weakening
short-term technical indicators and still squarely in the middle of its own
medium-term trading range. The Straits Times Index (STI) showed weakness in
late Friday trading to close at 2,919, still up 1.3% on the week but not quite
as strong as earlier.
The BSE Sensex 30 was up 2.1% in early afternoon Friday local time to 17,528
after spiking from 17,200 in early afternoon Tuesday to 17,560 in early morning
Wednesday, including a gap up at the Wednesday open, as it powered through a
medium-term resistance in the low 17,300s.
There remain short-term resistance levels at 17,640 and 17,700 that may also
enforce a long-term resistance (from May 2008) at the latter level. Indian
media, however, speculate on further strength through renewed dollar carry
trade, and short-term technical indicators are relatively strong.
If there is an inter-regional rotation of strength within the broader Asian
complex, this has occurred from the Greater China exchanges to Northeast Asia.
However, Northeast Asia comprises only two markets, Japan and South Korea, each
of which has its own idiosyncratic dynamics, such that a generalization about
them together is dangerous. Yet India and Singapore have also done well over
the last several weeks, with Singapore tending more to conform to Mumbai than
to its other candidate pattern in Australasia.
The conclusion is there is no clear indication of an overall Asian downturn yet
in the cards, barring unexpected catastrophes, but each national market will
continue to evolve following its own logic regardless of interconnections with
other Asian equity markets.
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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