Analysts upbeat about SE Asian bourses

Analysts upbeat about SE Asian bourses

SINGAPORE (Dow Jones): While there is a sea of red across Southeast Asian stock indexes Monday after sharp falls Friday on Wall Street, technical analysis suggests there may soon be reason for optimism on some regional bourses.

These hopes are tempered somewhat by a bearish close Friday on the technology-heavy Nasdaq Composite index.

Nevertheless, the Kuala Lumpur Stock Exchange Composite Index, which is down 28 percent from its year-high of 1021.20 in February, may be in the process of forming a bullish price pattern known as a falling wedge.

At 0515 GMT, the index was at 736.52, slightly above Fibonacci support at 736.11, representing the 61.8 percent retracement of the rise to 797.93 Oct. 27 from 697.90 Oct. 10. If the index bounces from around current levels, the price action could form the falling wedge, which would target a move to 800.

Near-term there is minor underlying resistance at 745.10, the Nov. 3 low.

Elsewhere, the Philippine Stock Exchange Index, which is down 33 percent from its year-high of 2,158.21 in January, may have formed a base.

The index surged 17 percent Nov. 6 to close at 1,500.10 from the previous close Oct. 31 at 1,287.85 on expectations embattled President Joseph Estrada would soon step down to end a political scandal, which has weighed heavily on Philippine financial markets in recent months.

While Estrada says he will remain in office, and fight allegations of bribery against him, the price action on the stock index is bullish in the longer-term.

The feature of the daily chart is a massive "breakaway gap" between the Oct. 31 close and Nov. 6 open at 1,371.00. Technical analysis says this breakaway gap - so-called as it coincided with break of major downtrend resistance - doesn't have to be closed by a price pullback to this area.

The Straits Times Index in Singapore is trading down toward support levels, however, an extremely bearish descending right triangle price pattern may be forming in this index, which is cause for concern.

For now, Fibonacci support levels produced by a recent rally to 2,069.47 from 1,796.66 are 1933.07 - a 50 percent correction of the rise - and 1,900.97 - a 61.8 percent retracement. At 0515 GMT, the STI was 1,947.95, down 25 percent from a year-high of 2,582.94 in January.

But a decisive break under 1,800, which would take out a series of lows during October, would target a fall in the index to 1,190. Although this might be improbable from a macroeconomic perspective, the index would look extremely sick technically under 1,800, and likely trigger heavy selling of STI futures.

In neighboring Indonesia, the Jakarta Composite stock index has been in slightly downward sloping trend channel since Sept. 22, with an upper edge Monday at 428.10, and lower boundary at 397.70. At 0450 GMT the index was at 425.38, down 40 percent from a year-high of 707.47 in January.

Technical analysis says to respect the parameters of this consolidation pattern until the boundaries are breached, but to buy either a topside break, or sell a downside break for a 30- point move - the width of the trend channel.

And in Thailand, the SET index must overcome resistance at the 100-day moving average at 297.40, and a four-point downtrend line from 354.08 peak in June at 299.10, before it can undertake any meaningful rally.

Underlying support is at 285.90, the high from Oct. 20.

But the true challenge for indexes of Southeast Asian bourses, many of which are heavily stacked with technology and telecommunications issues, may be whether they can resist a bearish technical outlook on the Nasdaq Composite Index.

The Nasdaq close Friday at 3,028.99 triggered a bearish symmetrical triangle pattern with a target of 2,690.00 target. If the tech-laden U.S. index falls to that sort of level, regional indexes may struggle to move higher.