MARKET RAP Bright spots defy
Asia's enervation By R M Cutler
MONTREAL - This week's patterns in Asian
equity markets were far from uniform. Not even all
exchanges benefited from the general relief over
JP Morgan Chase's purchase of Bear Stearns.
Rather, there were three basic market reactions to
the event. These ranged from an immediate jump of
over 3% in the Mumbai's BSE Sensex 30, the
Australia All Ordinaries, and Hong Kong's Hang
Seng Index, to more modest 1-2% rises in the
Nikkei 225, the Singapore Straits Times Index, the
Seoul KOSPI Composite; to no reaction or even
negative reaction in the Shanghai SSE Composite
and the Taiwan TSEC.
After the Sensex 30
opened on Tuesday so strongly up above its Monday
close, it has not looked back. In the absence of
an unexpected sudden decline on Friday 27,
therefore, it is prepared
to
finish the week stably above the 15,800 level
attained last July 24, its high before the buying
mania of the autumn took hold that pushed the
index up over 20,800. The punch through the 15,800
resistance was led by the financials, with HDFC
remaining strong all week but the State Bank of
India giving up most of its Monday-Tuesday gain
later in the week.
Tata Motors also
helped, strongly up on reports that it would
purchase Ford's Jaguar and Land Rover brands for
US$2.3 billion, but headed down for the rest of
the week and looks good to close below its Monday
open. Still the Sensex at the time of writing
looks like finishing Friday not far from its early
Tuesday spike, perhaps slightly above it. Likewise
the Australian market, where the finance sector
also led the recovery; whereas Hong Kong has
continued to rise steadily throughout the week and
looks to close fully 9% above its Monday open.
Singapore, Seoul and Tokyo, which had
similar responses to the JP Morgan Chase purchase
of Bear Stearns, followed closely the same pattern
for the remainder of the week, with less mid-week
strength and a stronger finish than Hong Kong, and
also with lesser amplitude, so that their closes
on Friday are all 3% to 3.5% above their Monday
open, with a third to a half of that gain coming
overnight Monday-Tuesday. Finally, Shanghai is
down 6.5% from the Monday open at mid-day Friday
after being down fully 10% earlier in the day, and
Taiwan closed down about 4% on the week.
If we look at year-to-date behavior, the
exchanges group themselves a little differently.
Taiwan is an especially strong case, in that its
mid-March weakness did not even threaten to
retrace to its January low. Australia and South
Korea found supports at their January lows, did
not fall below them, and are closing out the week
significantly above those levels; Tokyo could also
join these two in a group, but it finished the
week so equivocally close to the support that
further confirmation is needed.
Another
pairing consisting of Hong Kong and Singapore has
closed back above January lows after penetrating
those support levels earlier this month. Finally,
Mumbai and Shanghai have not succeeded in rising
above their January lows after penetrating them on
the downside.
Australian equities were hit
by the Friday report that financial services group
Opes Prime went into receivership, as this led
financial stocks down for the day. By contrast,
the Canadian S&P/TSX index, which has often
tracked Australian markets due to the two
countries' similar industrial and export
structure, has been up 6% over the five business
days from market-open on Thursday 20 through
market-close on Thursday 27. This rise appears due
the near-term resurgence of commodity prices, a
snapback of banking stocks on the backs of the
Bear Sterns buyout, and the telecom stock BCE.
There are no obvious criteria that permit
generalizations about why these groups form the
way that they do, even if most Asian exchanges
have, like most world markets, responded with
nearly uniform and sporadically violent movements
to the successive unfolding of the American
subprime crisis.
A new report by the UN
Economic and Social Commission suggests that the
high-technology export dependence of Taiwan,
Singapore and South Korea would put them at most
severe risk in the event of continued dollar
weakness and an American recession. This same
report suggests that India's strength in
manufacturing and the service sector makes it
likely to survive such a recession in the least
bad shape of Asian economies.
General
gains late on Friday in Asia were attributed to a
report that China will permit insurance companies
on the mainland to purchase local Hong Kong stocks
through asset management companies. However, the
tone all over Asia remains dismal due to
volatility and poor sentiment in the US markets,
even though the national economies have as a whole
remained relatively unaffected by the credit
crunch soap opera.
It does not augur well
that the US exchanges finished Thursday with big
losses on high volatility, driven, it seems, by
nothing more than a bad earnings report by the
technology leader Oracle and continued unease over
the financial sector, which the apparently
good-numbers completion of the Fed's first auction
in its Term Securities Lending Facility was unable
to overcome. This put the bellwether S&P 500
back below its one-time key support level of 1330.
We shall see what surprises the weekend holds.
R M
Cutler http://www.robertcutler.org
is a Canadian international affairs
analyst.
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