MARKET RAP Shadows lighten over
Asia By R M Cutler
Asian bourses were broadly lower this week
as economic fundamentals and the financial
intermediation of national markets kicked in to
trump technical consideration and drive the
fluctuations. To speak first in general terms,
before discussing individual markets: Asian stocks
declined not so much because of fears of economic
downturn in countries such as the United States
that consume Asian production, but rather as a
result of rising prices of raw materials (of which
oil was the most attention-getting but hardly the
only one).
As a result, investors who had
used Japanese yen borrowed at low interest to
purchase high-yield assets turned around and sold
them, moving after some hesitation into Japanese
government bonds. This strengthened the yen
against the euro, in whose zone
inflation remains high after the
European Central Bank left interest rates
unchanged.
Meanwhile, the yen rose against
the dollar on fears of continuing problems in the
credit markets. Notwithstanding the pronouncements
of leading Western bankers that the troubles ahead
will be less than the troubles already seen, since
it is clear that these troubles (some of which
certainly remain unfathomed) will still be with us
still for several years. It will be interesting to
watch, therefore, who will trot them out when for
what purpose.
Hong Kong, Singapore, and
South Korea all shared a pattern of being mostly
unchanged the first two days of the week but
following this with consistent large declines.
Hong Kong looks to end down 5% on the week, at the
important 25,000 level, having filled in the
mid-January gap-down between there and 25,800 but
not having yet definitely decided which way to
turn after the fact.
Singapore looks to
finish down about 3%, and South Korea 2%. Indian
exchanges were down more steadily but with less
volatility each day, so that both the BSE Sensex
30 and the Nifty look to close registering losses
of about 3% for the week. This would put each of
them just about 2% above the somewhat tenuous
support levels established on January 22, these
being 16,700 for the Sensex and 4900 for the
Nifty.
Shanghai resembled the foregoing
markets in being basically unchanged through
Wednesday mid-session, but then it fell like a
rock through Thursday morning to reach 3,530. Then
it rebounded and now continues oscillating around
3,600, where it landed two weeks ago after a
strong gap-up (from 3,250) resulting from changed
tax rules. This level it continues still to test,
but still without having backed and filled the gap
to turn it into a support level.
This part
of the market analysis began with a discussion of
Japan’s international economics. As for its
principal equity index, the Nikkei 225 was
unchanged Monday, up Tuesday, then opened up but
closed down on Wednesday, then dropping steadily
if not precipitously on Thursday-Friday, closing
out the week almost unchanged but on the downside,
moreover close to 13,700, that is, below the
support (now resistance) over which it had two
weeks ago broken out.
In addition to the
considerations mentioned at the head of this
article, for Japan in particular, the expected
sluggishness of Toyota's sales did weigh on the
Nikkei index. However, Toyota's guidance also
invoked the expectation of a stronger yen, which
has already begun to kick in as mentioned, and
also the price of gasoline as an element affecting
not Japanese manufacture but American consumption
(of Toyota's automobiles).
Taiwan followed
the Nikkei's pattern with the exception of being
down on Monday instead of unchanged, so that the
TSEC weighted index ended the week down almost 2%.
This would put it close to 8,840 but well above a
series of successive supports from 8,725 down to
8,425, of which the most notable and concentrated
is at the 8,500-8,550 level. It bounced in midweek
on the announcement of major cooperation between
industry leader TSMC with Intel and Samsung on
development of manufacturing technology for the
next generation of silicon wafers. However,
broader concerns led it back lower afterwards.
Finally, this week the Australian and New
Zealand markets had their own pattern, being more
or less unchanged Monday and Tuesday and strongly
on Thursday and Friday. The difference between
them was that Australia was unchanged also on
Wednesday whereas New Zealand was strongly down.
This week it became clear just how far China's
hunger for Australian goods has extended from raw
materials to listed companies on its stock
exchange, and that sentiment accounts for much of
the difference. Partly in this connection, the
Australian dollar also had a good week and looks
to have more of the same.
To summarize,
the Asian markets resumed different sub-regional
profiles this past week, but most of them still
remain on a razor's edge and those that were in a
no-man's-land last week (such as the middle of a
former gap-up or gap-down) have still not decided
which way to turn. R M Cutler
(rmc@alum.mit.edu) is a Canadian international
affairs analyst.
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