MONTREAL - Asian markets fell broadly
every day this week, although some individual
exchanges were inevitably able to mark a few up
days. The MSCI Asia Pacific Index looks to close
down nearly 7% on the week, its biggest weekly
fall in a year, at its lowest level since mid-July
2006. Seven stocks are down for each one that
rose, and all 10 industry groups took hits.
It is not evident that this trend will
change significantly in the near future. Traders
are overcome by a combination of continuing
problems in the financial sector, increasing
credit risks, downgrades in profit outlooks across
the board, and a continuing commodity-price
correction.
Of the exchanges and indices
usually reviewed here, the best
performances were turned
in by India's BSE Sensex 30, which was nearly even
on the week since last Friday's close, and New
Zealand's 50 Index Gross, which lost 0.5%. The
next-best loser was the Seoul KOSPI, down 4.5%,
while other national indices throughout the region
lost between 5% and 7.5%, with the exception of
Taiwan's Composite weighted index, down a
remarkable 10.5%.
Moving to regional
detail, both New Zealand and Australian dollars
hit two-year lows. The pullback in the Australian
mining sector continued as the All Ordinaries
failed to make good on last week's upside breakout
over a short-term declining tops downtrend. The
index lost 5.2% to close at 4,947, which is
however still within the 4,900-5,100 range
established by its May through October 2006, a web
of both support and resistance. New Zealand
actually reached the high 3,300s on Thursday
before opening Friday in the low 3,300s, although
it has recovered a little ground since then. This
puts it at the level of last Friday's close.
Wellington's moves this week confirmed
3,400 as a still significant resistance first
established in summer 2006 and most recently
confirmed this past February. Singapore, a member
of the "middle"group (see Down
is a four-letter word , Asia Times Online,
July 4, 2008), is losing 6% on the week to trade just
below 2,570 by the Friday close, cascading
through the 2,800 level where it had halted a
previous decline in mid-March this year. Its next
stop is the mid-2,400s, where it has significant
support dating from December 1993, reconfirmed in
January 1996, but most recently only in December
1999.
Among the Greater Chinese markets,
the Shanghai Composite is down 7.3% on the week to
the low 2,200s, the level that I have frequently
predicted in this space as its next stop in view
of its activity in late 2001 and early 2002 where
a band of support continues down to 2,100 and
further to 1,900. It has now collapsed 64% from
its high near 6,100 only 11 months ago. This
percentage is a significant figure according to
influential schools of wave analysis, so it
remains an open question whether the index will
decide to break this level further to the
downside. If it does, then the mid-1,700s provide
the next support, dating from June 2002, confirmed
in March 2004, but most recently only in July
2006.
As for Hong Kong, the Hang Seng is
losing 7.1% this week to close below 20,000 for
the first time since April on a support from
January 2007. The next significant support after
this is at 17,400 dating from December 1999 and
confirmed in late 2000.
The Taiwan Stock
Exchange Composite is, as mentioned, the standout
of the week, losing a remarkable 10.5% to near
6,300 in just five days. So doing, it dashed hopes
that last week's rise to near 7,100 would begin a
break-out above a longstanding support that I have
pointed to before, most recently just last week,
8.6% below its 6,840 low from three weeks ago, and
breaking even below a 6,400 support dating from
August 2005.
Relatively weak supports
established in 2004 range down to the mid-5,500s.
The Taiwan index was one of the three worst daily
losers on four of the five days this week. Almost
needless to say, it was also the most volatile
exchange on the week. Shanghai and Hong Kong were,
by contrast, respectively only fifth and sixth.
This week, however, volatility was a hard league
to win in.
Mumbai's BSE Sensex 30, which
often shares high volatility with the Greater
Chinese group, was in fact the second most
volatile of the indices covered here, although it
looks to close more or less unchanged on the week
(having been closed, however, on Wednesday, which
may have limited the damage). Opening in the
mid-14,300s on Monday, it ranged up to its
previously established resistance at 15,100 before
opening lower on Thursday and still lower on
Friday (down 2.5% from its Thursday close), and
looking to finish the week in the mid-14,400s. For
the time being, then, Mumbai continues to occupy a
14,100-15,100 trading range, although there is of
course no guarantee that this will continue even
through next week.
Tokyo was the second
least volatile exchange on the basis of intraday
fluctuations, but steady downtrends as well as
openings lower than the previous day’s close led
the Nikkei 225 to fall 6.5% by Friday, closing at
12,212, still only the fourth worst performance of
the week when set against the other,
near-catastrophic losses. The Nikkei’s next
technical support level comes in only in the
11,700s (dating from May 2002), although one can
see the possibility of a broader band of support
extending in a net down to the 11,300s (dating
from April 2004 - April 2005).
Finally
Seoul, the other middle-range bellwether besides
Tokyo, was the second best performer this week,
losing "only" 4.5% to close at 1,404, in the
middle of a weak-looking support range,
established in January-May 2005, that stretches
down to the 1,320s. Although there are a few minor
terraced supports down from that level, including
notably in the low 1200s, nevertheless the next
really major support level, ominously, comes in
only at the 1,000 level, a technically strong
formation dating from 1999-2000, with
reinforcements further at 930 and the low 800s.
In conclusion, market psychology worsened
this week in Asia, and there are objective
macroeconomic and financial reasons for that.
There are few if any points of light. Ill winds
extinguish attempts to light candles. Don’t curse
the darkness, just stay inside.
R M
Cutleris a
Canadian international affairs analyst.
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