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.