Looks like something positive is brewing in Europe, but I don’t want to jump the gun. China looks weak, US probably through its worst, Europe still faces plenty of pain even if fiscal reform and euro-bonds introduced. Game changer would be QE/asset purchases by Fed and ECB.
Asia rallies
Asia rallied Monday on encouraging signs from Europe, with the Nikkei 225 testing 8300, the Seoul Composite (KOSPI) jumping to 1815, and Hang Seng above 18000. But a look at the quarterly chart of the Nikkei shows a long-term, bearish divergence on 63-day Twiggs Momentum, while the index is headed for a test of key support at 7000/7500. Unless we see a break above the descending trendline, the trend remains downward.
South Korea’s Seoul Composite index is headed for another test of 1650 according to the weekly chart. 63-Day Twiggs Momentum oscillating well below zero indicates a strong primary down-trend. Failure of support would offer a target of 1350*.
* Target calculation: 1650 – ( 1950 – 1650 ) = 1350
Hong Kong’s Hang Seng index recovered above 18000 Monday but the long-term trend remains downward. Steeply descending 63-day Twiggs Momentum warns of a strong primary down-trend.
* Target calculation: 16 – ( 20 – 16 ) = 12
The Shanghai Composite index did not share the enthusiasm of other Asian markets, testing support at 2375. Reversal of 13-week Twiggs Money Flow below zero warns of rising selling pressure. Failure of support at 2300 would offer a target of 2050*.
* Target calculation: 2300 – ( 2550 – 2300 ) = 2050
China’s ‘Princelings’ Pose Issue for Party – WSJ.com
The offspring of party leaders, often called “princelings,” are becoming more conspicuous, through both their expanding business interests and their evident appetite for luxury, at a time when public anger is rising over reports of official corruption and abuse of power.
State-controlled media portray China’s leaders as living by the austere Communist values they publicly espouse. But as scions of the political aristocracy carve out lucrative roles in business and embrace the trappings of wealth, their increasingly high profile is raising uncomfortable questions for a party that justifies its monopoly on power by pointing to its origins as a movement of workers and peasants.
China labour unrest flares as orders fall – FT.com
“There has been an intensification of labour unrest in the past week that is probably the most significant spike in unrest since the summer of 2010,” said Geoffrey Crothall of China Labour Bulletin, a Hong Kong-based labour advocacy group that monitors unrest in China.
….Factories are cutting the overtime that workers depend on to supplement their modest base salaries, after a drop in overseas orders.
Hormats Argues for ‘Competitive Neutrality’ Between U.S., China Firms – China Real Time Report – WSJ
U.S. Undersecretary of State Robert Hormats:
“What I am saying quite simply is that the U.S. is not passing judgment on whether or not China chooses to have state owned enterprises. Our concern is that to the extent they do, those SOEs should not receive benefits (e.g., preferred financing, exemption from anti-monopoly laws, generous export credits, etc) that put them at an artificial competitive advantage vis a vis private enterprises — of the U.S. or indeed any other country.
And I did not make the term ‘competitive neutrality’ up. This broad theme is incorporated in the (proposed trade deal called the) Trans Pacific Partnership and more specifically in Organization for Economic Cooperation and Development work.
My point is not to challenge the Chinese SOE model, it is to say that SOEs should operate within a system of global rules and norms, and that Chinese government support measures should not distort competition within that system….”
via Hormats Argues for ‘Competitive Neutrality’ Between U.S., China Firms – China Real Time Report – WSJ.
Australian sharemarket extends losses after weak China survey | The Australian
HSBC issued the preliminary “flash” version of its monthly manufacturing purchasing managers index survey – a closely watched non-government view on how China’s economy is faring. The survey fell to a contractionary reading of 48 for November, compared to a mildly expansionary reading of 51 last month. A reading of 50 separates expansion from contraction.
via Australian sharemarket extends losses after weak China survey | The Australian.
China and Hong Kong
Hong Kong’s Hang Seng Index is testing medium-term support at 18000; breach would signal another test of 16000*. 13-Week Twiggs Money Flow below zero warns of rising selling pressure.
* Target calculation: 16 – ( 20 − 16 ) = 12
The Shanghai Composite is testing medium-term support at 2400. Failure of primary support at 2300 would offer a medium-term target of 2000*. The long-term trend is edging lower in a controlled descent, so conventional target calculations do not apply. Recovery above 2600 is less likely, but would signal another test of the descending trendline.
* Target calculation: 2300 – ( 2600 − 2300 ) = 2000
China Home Prices Fall Most This Year as Curbs Drag Down Shanghai, Wenzhou – Bloomberg
CHINA — Home prices will fall between 15 percent to 30 percent in the next two years, according to Mark Mobius, who oversees $40 billion as Hong Kong-based executive chairman of Franklin Templeton Investments’ Emerging Markets Group.
via China Home Prices Fall Most This Year as Curbs Drag Down Shanghai, Wenzhou – Bloomberg.
Asian markets
The Shanghai Composite Index reflects China’s controlled slow-down, edging lower with intermittent bear market rallies. The index is currently testing the descending (secondary) trendline at 2500. Penetration would offer a target of 2650 but would not indicate that the primary down-trend is over. Failure of support at 2300/2350 remains more likely and would offer a target of 2000.
* Target calculation: 2300 – ( 2600 – 2300 ) = 2000
HongKong’s Hang Seng Index is headed for a test of the (primary) descending trendline at 21000; breakout above 20000 would confirm. The primary trend remains downward, however, and respect of the trendline would suggest another test of 16000.
Japan’s Nikkei 225 Index is ranging between 8400 and 9100. Breakout would indicate future trend direction.
* Target calculation: 8400 – ( 9000 – 8400 ) = 7800
South Korea’s Seoul Composite Index continues to reflect buying pressure on 13-week Twiggs Money Flow. Follow-through above recent highs would indicate a strong bear rally, but the primary trend remains downward.
* Target calculation: 1900 + ( 1900 – 1800 ) = 2000
China’s inflation victory comes with high price – FT.com
In October, normally a peak month for home buying, real estate transactions plunged 25 per cent month on month, according to the statistics bureau.
via China’s inflation victory comes with high price – FT.com.