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Volatility Startles Asia |
| Source: |
atimes.com |
| Source Date: |
Tuesday, January 11, 2011 |
| Focus: |
Electronic and Mobile Government, Citizen Engagement, Internet Governance
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| Created: |
Jan 11, 2011 |
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MONTREAL - The MSCI Asia Pacific Index was nearly unchanged last week at 137.48 in Friday late afternoon Tokyo time, still above its medium-term ascending-bottoms upward trend line (its ex-Japan version and the FTSE Asia-Pacific indexes likewise) with relatively strong momentum but with a significant risk of becoming overbought in the near future.
Volatility in Shanghai, Hong Kong, and Mumbai decreased slightly but it increased outside those markets as for the first time in a month overall volatility became mildly correlated with downward movement in the markets.
There were, however, no geographical or sectoral-functional patterns to speak of. Overall volatility in Asia was not greater than in recent weeks, but the variance increased as three exchanges lost over 2.1% and three gained over 2.9%.
The least volatile was Australia, where the All Ordinaries Index lost 0.7% on the week to 4,812. This level is still significantly above the most recent short-term ascending-bottoms upward trend line yet also well within the 4,500-5,000 range that it has mostly occupied since July 2009 with the exception of a number of weeks last summer. Also it remains highly constrained by the 4,872 level to which I pointed on December 10, above which it has since closed only on December 30 and failed to sustain.
It is still not clear whether this level would in fact be the third fan of a triple-fan formation. The index is ready to test its 50-day moving average and lower Bollinger Band from the upside. Short-term technical indicators are ambivalent: volatility is down but momentum is negative.
The IT-heavy exchanges in Seoul and Taiwan were two of the four least volatile last week but their absolute performances were opposite one another. South Korea's KOSPI closed up 1.7% to a new all-time high of 2,085 although on weakening short-term technical indicators including looking overbought.
The TSEC/Taiex, by contrast, was one of the three biggest losers in absolute terms on four out of the five days, and finished the week as the second worst performer, down 2.1% to 8,783. The Taiwan index remains well above its medium-term ascending-bottoms trend line and, aside from looking a bit overbought, has still generally favorable short-term technical indicators. As was to be expected, volatility was up and momentum down after most of the week's loss came on Wednesday, which opened near its intraday high of 9,027.
The other two Greater China exchanges fared better last week. The Hang Seng in Hong Kong was one of the week's two standouts, up 3.1% in early afternoon Friday local time to 23,807 although showing a little weakness after the midday break, closing the day at 23,686. Yet Friday also saw the week's intraday high at 23,881. Short-term technical indicators are ambivalent, however, as the index is coming off an overbought signal but has slipped under its 50-day moving average. It is trying to strike through the third fan of what would be a triple-fan formation; the upper bound for success passes through 24,243 next Friday.
Shanghai slipped below its short-term ascending-bottoms uptrend support over the holidays and is struggling, so far unsuccessfully, to remain above its medium-term counterpart. This latter passed through 2,872 on Friday, whereas the SSEC's weekly intraday high was just below that level, also on Friday, as the index fell back later in the day to close the week up 1.4% at 2,847. Yet volatility is up, momentum is actually negative, and it is more overbought than oversold although technically neither. It is now back in the very narrow 2,825-2,875 trading range that it occupied from mid-November almost to mid-December.
The Japanese exchange continued its recent remarkable performance as Tokyo's Nikkei 225 index closed up 3.0% to 10,541 with short-term technical indicators weakening slightly but still showing good strength as volatility fell and momentum strengthened, although a short-term overbought situation has appeared. The index's next major short-term resistance is at 11,292.
In Southeast Asia, Singapore took after its financials-heavy counterpart in Hong Kong with a good gain, while Indonesia and Malaysia diverged from one another. The Straits Times Index was up 2.1% in late afternoon Friday local time to 3,258 after matching but not topping its Thursday intraday high at 3,280. Short-term technical indicators turned positive in the last ten days of December and, although the index is at present a bit overbought, momentum is strong despite high volatility. It may yet soon make another assault on its November 11 short-term high at 3,293, its highest level since mid-January 2008.
Malaysia continued its strong performance as the KLCI found itself up 3.4% in late mid-afternoon Friday local time, to 1,571. It has gained sudden strength since the beginning of the year and plowed almost parabolically through its mid-November previous all-time high. The KLCI is now in one of those situations where strong momentum and high volatility are counterbalanced by a close-to-overbought status.
By contrast, the JCI in Indonesia was doing fine until Thursday morning and by Friday mid-afternoon local time was down 2.3% on the week to 3,619, barely above its medium-term ascending-bottoms upwards trendline, which passes through 3,610 on Friday (rising to 3,624 on Monday and 3,642 by the end of the next week) and is apparently ready for its first real test in five months. (The corresponding support for the KLCI is at 1,438.)
The JCI's short-term technical indicators began to turn negative in mid-December and have not improved since then (they also have not worsened greatly) although the previously overbought situation has been rectified.
Finally in India, the Sensex is down 2.9% on the week to 19,918 in Friday mid-afternoon local time and continuing to weaken to close at 19,619, falling every day last week except Monday. It was one of the three worst performers every day without exception. Mumbai and Jakarta were tied in a battle all day Friday for the week's most volatile performance. Not only is volatility up in Mumbai but also momentum has turned slightly negative while other short-term technical indicators are at best ambivalent but clearly worsening. Underneath 19,872 the next support is only in the 19,150-19,250 range.
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