MONTREAL - This week was atypical in Asian equity markets, as traders tried to
find balance in the wake of the last week�s turbulence.
Recall that a number of markets were saved from meltdown in the trading week
ending September 19 by massive increases in liquidity engineered by concerted
action of the central banks from the major industrialized countries. Monday
followed through in Asia on the Wall Street short covering rally, for which the
liquidity boost was really intended, so as to avoid credit squeezes seizing up
the system as happened in Russia, requiring the exchanges there to be closed
for several days.
With Europe indecisive, Asian equity markets had a relatively rare chance on
Tuesday and Wednesday to show some global leadership but instead vacillated all
week, though with different
exchanges showing their distinct personalities, until on Friday there was an
almost universal but still fairly moderate falling-off that did the
worst-performing markets no good at all. But let us start with what passes for
the good news.
The Shanghai Stock Exchange Composite followed on a 9.5% one-day advance last
Friday with a 9.6% rise this week, most of which (7.7%) came Monday, though
that did not stop it from being the best performing average three out of the
five days of the week, and third-best one other day. The move followed reports
that the Chinese cabinet, in response to slumping prices and trading volumes,
had decided to allow short selling and margin lending. In fact by the end of
the week, it had brought the index back up into the high 2,200s, above the
2,100-2,200 support level that caught its fall from the astronomical all-time
high over 6,000 only a little less than a year ago.
The Hang Seng Index in Hong Kong, which tends to move with Shanghai, especially
recently, followed it as the second-most volatile index in the region but,
instead of gaining, was the biggest loser on Tuesday, the second biggest on
Friday, and the third biggest on the week. It was down 4.0% at the start of the
Friday afternoon trading session to 18,551, significantly above its intraday
low last week at 16,284 but finishing strongly upwards in afternoon trading and
looking to close around 18,900 or even higher.
However, even that would still be 1,000 points below the most acute of the
three descending-tops downtrends that have taken it progressively lower
progressively faster since the beginning of November 2007.
The other Greater China exchange, Taiwan, had a schizophrenic week. On Tuesday,
it was the best performing exchange in the region, and on Monday the third
best, but then on Wednesday and Thursday it was the second worst, and finally
on Friday worst of all. All this put it in the middle of the pack as regards
both volatility and percentage change, down 1.0% to close Friday at 5,929,
sliding downwards and less than 1.0% above its low for the week. With its close
last week around 6,100, the Taiex now looks caught at least temporarily in the
web it wove from 5,800 to 6,200, and more broadly from 5,500 to 6,500,
throughout most of 2004 and nearly all of 2005.
This index does not show the triple descending-tops fan that characterizes a
number of other Asian equity indices. It has one major such downtrend dating
from a little over four months ago (during which time it has lost 36.3% from
its high at 9,310), and another dating from the end of August out of which it
has now broken with the rebound over the last seven trading days from its
intraday low last week at 5,530.
The contrast to all this frenzy is to be found in Australia and New Zealand,
which were this week (oddly with Tokyo rather than Singapore as is often the
case) two of the three least volatile national Asian equity markets. This
relative docility did not prevent them from moving in rather mediocre fashion
this week, but the Australia All Ordinaries did turn in the third-best
performance (in fact it was twice this week one of the two best daily), ending
up 1.9% on the week with a strong finish, while Wellington was down 1.7%,
nearly all of it on Friday and fading fast.
The All Ordinaries performance is the first small piece of good news in a long
time for nearly any exchange. Its significance is that the index has broken
through one of its major descending-tops downtrends, specifically the most
recent one, established since mid-May.
On Friday this week, that line passed through the 4,877 level. All day Friday,
this index was falling steeply from an early high at 5,019. At 2:07pm local
time, it reached the aforementioned level at 4,877, vacillated for four minutes
between 4,875 and 4,879, and then rebounded before taking off strongly upward
for the rest of the day to finish the week at 4,934. It is still mired in the
4,900-5,100 web where it has been for some time and which I have discussed
before. But also, it is not the first time since the end of 2007 that the
index, perhaps any index, has conquered a short-term descending-tops trendline.
The Wellington NZX 50 Index Gross does not share the triple-fan pattern with
other exchanges. It manifests a single, repeatedly confirmed although slightly
fuzzy descending-tops trendline dating from the second half of October 2007. It
may meet that line as early as next week, but the index�s close this
Friday at 3,187 was not a strong performance.
The statistical confirmation that the national economy has entered its first
recession in 10 years is likewise hardly encouraging. Yet the Australian dollar
rose against the US currency even as both it and New Zealand's fell against the
yen. Sydney is a candle in the darkness at the end of this month, but it will
take some time to see whether the swirling winds will extinguish it or not.
R M Cutler (http://www.robertcutler.org) is a Canadian
international affairs specialist.
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