Charting around Asia
Anger and Angst in Asian Markets
by John Needham, The Daniel Code Report | September 3, 2008
PrintNo Olympic medals for China's Stock Market
I suggested in several earlier editions of this column that China’s Shanghai Stock Exchange Index may have a bout of the post Olympic blues. After China’s sparkling efforts to top the Gold medal tally at the Beijing Olympics, the stock market blues have not only bitten but they seem to have been a continuous contagion since the small bounce in April. At present this market is down 62% from its October 2007 high and the wealth destruction as reality subsumes euphoria must be massive.
Interestingly its cousin across the water, China’s other market, Hong Kong’s Hang Seng index is fairing better but it has already given up almost 50% of its post 2003 gains.
Burn Baby, Burn
Pakistan, known for its prowess and sporting behaviour on the cricket field, obviously doesn’t take that good humour to the stock market. From the BBC: Angry investors have attacked the Karachi Stock Exchange (KSE) in protest at plunging Pakistani share prices. More than 200 people took part in the demonstration at the country's main stock exchange in the southern city. A number of windows were broken and at least two people injured.. The protesters demanded a temporary closure of the KSE to stop further slides. It is down 14% since Monday and reached an 18-month low this week. There were smaller protests in the cities of Islamabad and Lahore, where demonstrators burned tyres near the local exchanges.
Recent falls in the Karachi Stock Market Index and its underlying stocks have caused repeated bouts of regulatory intervention including closing the exchange and placing daily floor limits. Unhappy long side traders vented their anger by rioting and setting fires. Pakistan Daily Times 08/30/08 The Karachi stock market witnessed a bearish trading week on account of unabated cycle of selling pressure on political concerns, record devaluation of the rupee against the dollar and worsening economic conditions.
The Karachi Stock Exchange (KSE) 100-share index lost 785.55 points or 7.86 percent to close at 
9,208.26 points as compared with previous week’s 9,993.81 points. The average turnover declined to 23.86 million shares as against previous week’s 103.35 million shares. Pakistan’s equity market remained lackluster last week prompting intervention from regulators to set a floor. Moreover, political uncertainty resurfaced with the departure of PML-N from the ruling coalition on Monday and hence kept investors uneasy.
In addition, deteriorating Balance of Payment (BoP) situation kept pressure on the rupee. Hence, the market fell last week to close at 9,208 points, with market capitalisation at $38 billion, down 40 percent (50 percent in dollar terms) from its peak of $75 billion as of April 18, 2008. Pakistan’s markets held on long after major markets had topped globally and now has a bit of catching up to do. The murky world of Pakistani politics escapes me but essentially they are swapping an army backed oligarch Musharrif for a choice between a failed ex PM and Mrs Bhutto’s husband, essentially another of the sub-continents ruling dynasties.
WASHINGTON: The United States is said to have serious concerns about Pakistan's nuclear arsenal coming under the control of its prospective president, Benazir Bhutto's widower Asif Ali Zardari, given reports of his dodgy mental condition. Washington's worries reportedly rose last week following the disclosure of medical records indicating that as recently as last year, doctors hired by Zardari had diagnosed him with mental problems including depression and posttraumatic stress disorder. Much of it is said to be related to the eight years Zardari spent in prison as Musharraf's guest.
As you see from our theme photo, these punters don’t take kindly to being on the wrong side of a bet! Market intervention by regulators doesn’t mean the crocodile won’t eat you. It just means the crocodile will eat you last as Neville Chamberlain found out to his cost.
India
Across the border in India, the SENSEX index from India’s oldest Stock Exchange, the Bombay Stock Exchange fell 41% into its July low but has rallied for two months as Global selling has temporarily abated.
In the most serious flooding in 50 years, the Eastern Indian State of Bihar, near Nepal has been inundated by monsoonal flooding which has so far claimed the lives of 679 people. Given the complete lack of any emergency relief plan and with over 20 million people displaced, the death toll will rise alarmingly. Highlighting the lack of a central government response plan, desperate citizens applied to India’s Supreme Court to try to enforce government assistance. Headlines India reports: New Delhi: The Supreme Court on Tuesday refused to accord an urgent hearing to a plea seeking massive relief and rescue operations in the flood-hit Bihar. Hearing a public interest lawsuit, the Court refused to make the orders sought. Observing that the government was already doing the needful, it said the petition would be heard only on the date slated for it by the court's registry - September 15. The petitioners sought the court's urgent directions to the state and central governments to "undertake relief and rescue operations on war footing", saying "the government machinery is moving at a snail place" in providing relief to the victims.
"The government has so far pressed merely three helicopters and less than 100 boats for the rescue and relief operations for more than two million people stranded in six districts of Supaul, Madhepura, Saharsa, Araria, Purnia and Katihar," said the petitioners. Seeking the court's direction to the two governments to launch a massive relief and rescue operation, the petitioners said, "More than two million people are in the imminent danger of losing their lives for want of food and drinking water."
Dwelling upon the governments' alleged apathy to the plight of flood victims, the two petitioners said that 10 days after the Koshi river inundated the six districts of the state, the government officials were not even sure of the toll of human lives. Asserting that "the flood is not only on the account natural disaster but also owing to the bureaucratic callousness and carelessness", the petitioners said government authorities, instead of providing relief and rescue to the victims, were engaged in (the) blame game, holding the Nepal government responsible for the disaster. They also sought the court's direction to the central government to take up the issue of repairing and strengthening of the Koshi embankment in Nepal on an urgent basis. (IANS)
In case you think the chaos in India and rioting in Pakistan are mere news items, remember that both these countries possess nuclear weapons. The obvious lack of infrastructure and government control of its territories should make you think.
Japan
Tokyo - Japanese Prime Minister Yasuo Fukuda's abrupt resignation Monday has left the ruling party searching for a replacement who can tackle the political deadlock and flagging economy that overwhelmed the outgoing leader's year in office. The successor will also need to help revive the sinking popularity of the Liberal Democratic Party, which has ruled Japan for most of the past half century, and is required to hold general elections within a year. He'll be the third prime minister in two years to try to lead.
Japan however has probably the most advanced and institutionalized bureaucracy in the world, so no doubt it will be business as usual.
Japan’s Nikkei Index sold off on the news. It is near Danielcode support at 12441 and as always, it must hold the black DC number at 12011 on a closing basis or we are going to see much lower numbers.
Korea
The Korean Kospi Index has been the strongest of the Asian Indices since the 2007 highs. As an advanced technological society with an emphasis on the manufacture of big ticket items and heavy industry, the global slowdown has been relatively later to bite. This week the market broke its Daniel number black line at 1426. If that number is violated on a closing basis it implies much lower numbers ahead for the Kospi. Note that the swing marked in red which is being presently violated is only an intermediate swing. More DC support lies lower down on this chart.
Australia
Sept. 3 (Bloomberg) -- Australia's economic expansion slowed in the second quarter to the weakest pace in two years as consumers reduced spending, reinforcing the central bank's decision to cut interest rates for the first time since 2001. Gross domestic product rose 0.3 percent from the first quarter, when it increased a revised 0.7 percent. The economy grew 2.7 percent from a year earlier.
A slump in consumer spending, business confidence and stock market values has given the central bank ``more scope'' to cut borrowing costs, Governor Glenn Stevens said yesterday. The bank, which increased borrowing costs to a 12-year high in March, reduced the benchmark interest rate by a quarter point to 7 percent yesterday and signaled it expects growth to slow further. The chain price index, a measure of retail prices, climbed 4 percent in the second quarter from a year earlier, today's report showed. The bank aims to keep inflation between 2 percent and 3 percent on average.
The local dollar has fallen 14 percent since June 30, the worst performer of the 17 most-active currencies. Retail sales dropped in June by the most in six years, business confidence tumbled, and companies including Qantas Airways Ltd. and Ford Motor Co. fired workers. Home-building approvals slumped 2.3 percent in July, the fourth decline this year, a report showed yesterday. The unemployment rate rose to 4.3 percent in July.
Australia's 2.7 percent annual growth rate in the second quarter compares with 2.2 percent in the U.S., 1.4 percent in the U.K. and 1.7 percent in Germany. Australia's benchmark S&P/ASX 200 stock market index has slumped 19 percent this year on evidence the global credit squeeze is buffeting companies including Allco Finance Group Ltd. and Centro Properties Group, which last week posted the nation's biggest losses in five years.
Slower household spending is being offset by a mining boom, which is forecast by the central bank to increase income from exports by 20 percent this year, stoking profits at companies including BHP Billiton Ltd., the world's largest miner.
Did you get the Joke? Australia’s Reserve Bank runs a supposedly targeted inflation regime. With their measurement of inflation up 4% in a year and way above the Bank’s target, not to mention true household inflation at north of 15%, the Reserve’s response is to cut interest rates. Go figure! Australia has the most compliant financial media in the western world. As followers of the Aussie SPI will note, the index closed today down 25.27% from its March peak and was down 31% at its August lows. It’s officially a bear market guys, so perhaps we should send Bloomberg’s reporter back to school for telling us today it is down 19%, thus obviating the headline that the extra few percent should elicit!
The Daniel number black line at 4251 beckons for this chart.
Forex
India’s Rupee is getting belted by US Dollar strength. This is a managed or “dirty” float but India’s Reserve Bank uses the DC numbers for all its turns.
USD has made inroads on the Japanese Yen cross and is tracking its Daniel numbers nicely.
And the Aussie Dollar is having a heart attack on its US cross. This currency and NZ Dollar have been no brainers for the interest differential carry trade but as usual the funds didn’t know the high which the Daniel number sequence identified at 98502 and I expect a few others are having heart attacks as this trade unwinds.
AUD-USD is at a DC target of 82777 but it will see the DC black line at 79125 before a significant rally.
Gold
Gold remains on its weekly and monthly sell signal although Gold is still holding a strong position which is more apparent on the monthly chart available free to Financial Sense readers in the Gold Trend Charts on the front of the Danielcode website. Gold has held for four weeks at a DC retracement of an intermediate swing and is still governed by its inverse relationship to the US Dollar Index (DX) although that correlation is not as direct as it was earlier in the year.
Oil
Crude Oil broke through its old DC support at 111 which had held this market for three weeks and fell to just above the ominous black DC number at 104. A weekly close below 104 is the initial signal that Oil prices are headed lower.
US Dollar Index (DX)
DX has gapped into its DC retracement at 78.15. The purpose of this rally was to kill off the one way short trade espoused by all from gurus to fashion models. The low hanging fruit has now been comprehensively picked and we expect a retracement before this market continues its rise. Just past 81.89 is the intermediate target for DX.
I invite you to visit the Danielcode website to keep updated on the Free Gold and HUI trend charts and the international indices.
For those interested in the Daniel number sequence and its practical application particularly to forex trading, you may be interested in seeing our DC Forex model account also on the front page of the Danielcode Online.
CAUTION-The Daniel numbers on these charts are from historic sequences that may not be current at the time of publication. They are appended for historic interest only. Do NOT use these numbers to trade markets. Current Daniel sequence numbers for most currency crosses are available to subscribers at the Danielcode website.
Copyright © 2008 John Needham
Asia Editorial Archive
John Needham is a Sydney Lawyer and Financial Consultant. He publishes The Danielcode Report and writes occasionally on other markets. He lives with his family in Australia and New Zealand.
“The fox knows many things, but the hedgehog knows one big thing. A Hedgehog Concept is not a goal, intention or strategy to be the best. It is an understanding of what you can be best at. The distinction is absolutely crucial”. ~ Isaiah Berlin, The Hedgehog and the Fox
contact information
John Needham | The Danielcode Report | Taupo, New Zealand | Email | Website
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