MONTREAL - Asian equity markets by and large marked another week of solid
gains. Every national stock market exchange average reviewed here chalked up a
gain. With only two exceptions, these gains were over 2%, often well over. The
MSCI Asia Pacific Index ended at up 3.9% to 117.18, with the ex-Japan version
up 3.7% to 380.71.
The three main Greater China indexes upheld their reputation for volatility.
They were this week in fact the three most volatile. The South/Southeast Asian
group of India and Singapore were tied after them for the next most volatile,
while the Northeast group (Japan, South Korea) and the Australasian group
(Australia, New Zealand) were all generally not only quantitatively but also
qualitatively less volatile than the others.
The Hang Seng Index was the largest gainer, up about 4.5% through early
afternoon Friday at 21,161. There is great skepticism that it can follow
through successfully, given the fact that seven times in the last
two-and-a-half months it has popped through 21,000 only to fall back in the
next day or two. Nevertheless, short-term technical indicators for the Hang
Seng are moderately strong, with the significant exception being a decline in
turnover. I have previously pointed to the 20,000-21,500 level as an interval
of resistance for the Hong Kong average. Beneath that is a support just below
19,000.
The Taiwan Stock Exchange Composite (TSEC) powered forward 2.6% on the week,
tied for fourth greatest gain, and closing at 7,337, breaking through its
resistance in the high 7,200s from August of last year but not yet the one in
the low 7,500s from January last year. The latter coincides with the lower
bound of a still unfilled gap-down in late June 2008. The upper bound of the
gap is in the 7,800s.
The conviction on Friday, after the market close, of former Taiwan president
Chen Shui-bian for graft and his sentencing to life in prison is likely to have
a limited, if any, impact on the Taiwan market. This is not the crisis of a
whole political structure and it does not reflect on the island's current
rulers, who are drawn from another political party. The market also has a whole
weekend to digest the news, during which other news may well be deemed more
important.
In the near term, Taiwan's market will draw as likely to draw investors through
its strong earnings outlook and rising demand in China and other Asian
countries.
The most volatile was again the Shanghai Stock Exchange Composite (SSEC), which
closed however with the relatively small gain of 1.4%, the second worst of the
week, at 2,990, which is the top of the range that it "should" have respected
over the summer but did not, breaking out up to 3,500 in July.
Yet impressive production statistics and firm governmental statements that the
stimulus will not be rolled back continue to push the averages higher, and are
credited even this week with lifting them up. It must be said, however, that
the short-term technical indicators are not as strong as they might be, and
they do not by and large justify significant further advances at the moment.
In the Australasian group, the only interesting exchange was Sydney, where the
Australian All Ordinaries Index scored the second-largest advance of the week
(unless Mumbai recovers in late afternoon local time), up 3.4% to 4,596 as the
Australian dollar also continued to rise.
The Australian advance, unexpected in some quarters, comes on the back of the
recent near-term commodities run-up. Short-term technical indicators for the
Australian market therefore tend to be favorable, although they do suggest the
need for a brief consolidation as the index has hit a potential resistance
level inherited from October-November 2005. If it succeeds in breaching the
resistance, however, the chart gives it a clear run up to the 4,800-5,000
range, barring unforeseen extrinsic circumstances.
The Indian market is falling back in Friday trade to under 16,200 after having
gapped up to over 16,400 at the Thursday open. It still remains the region's
third-biggest gainer on the week, up 3.2%. Short-term technical indicators are
slightly ambivalent but more positive than negative. The low 16,000s are an
important resistance level that it has already twice unsuccessfully attempted
to break through to the upside since the beginning of summer. The third time
may well be the charm.
The Straits Times Index in Singapore is finishing the week in the low 2,680s,
up 2.2% on the week. It was at this level in early August but was unable to
continue its advance, confirming the resistance there inherited from a local
maximum occurring in early May 2006. Short-term technical indicators do not
show the strength that would give confidence to a prediction of a definite
conquest over this level.
I end with mention of the Northeast Asian indices. There is not much to add to
my recent, somewhat more detailed discussion of the South Korean situation (see
South Korea shows recovery skills, Asia Times Online, September 11,
2009). It is sufficient to add that Seoul's KOSPI was little changed on Friday,
closing at 1,651 with moderately strong but not overwhelmingly favorable
short-term technical indicators, suggesting that a consolidation may be in
order before further advances are traced out.
Finally the Nikkei 225 in Tokyo was up 2.7% on the week to 10,444 and still in
the midst of a wide interval from 10,000 to the high 11,800s that may well
constitute a trading range for some time into the future.
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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