Technical | Fundamental Analysis Discussion Stocks Listed In Bursa

Monday, August 31, 2009

Shanghai stocks fall to 3-month low on bank lending worries. Stronger yen drags on Nikkei after election.

HONG KONG (Reuters) -- Chinese stocks sank 6% to a three-month low on Monday, weighing on Asian stocks and sapping investor willingness to put money at risk.

Meanwhile the yen rose sharply after Japanese voters swept the opposition into power.

The election results, while widely anticipated, sparked some short-term buying of yen on hopes that new policies will support consumer spending in an economy trapped in deflation and haunted by a weak growth outlook, though domestic stocks slipped on exporter weakness.

Major European stock futures fell 0.9%, following commodity prices lower, in trade thinned by a holiday in London. U.S. stock futures fell 0.6% and U.S. Treasury futures were up 0.2%.

Outside of Japan, volatility in Shanghai, a market largely closed to foreigners, has curbed risk taking and has been weighing on the Australian dollar, which is a common target for investors searching for bigger returns because of its relatively high yields.

Shanghai-listed shares dropped 6.2% on the day, on track to post losses of 21 percent in August, only the second month that the composite index has fallen more than 20% in the last 15 years.

The index also crucially dropped below the 125-day moving average, what is viewed by many domestic investors as the threshold for bear and bull markets.

Fears that banks will rein in their lending after a torrid first six months of the year and an abundant supply of expected new shares have been knocking Chinese shares lower for the last month, often weighing on global investor sentiment about holding riskier assets.

Shares of Bank of China, the country's biggest foreign exchange lender, were down 3.9% in Shanghai and the top drag on the market. Hong Kong's Hang Seng dropped 1.8% to a one-month low in sympathy with Shanghai.

Tokyo's Nikkei share average fell 0.4%. Large exporters Canon Inc (CAJ) and Honda Motor Corp (HMC) were among the biggest drags on the Nikkei, losing around 3.3% and 1.8%, respectively, on the stronger yen.

Australian stocks also performed relatively well, falling only 0.2%. Shares of Australia and New Zealand Banking Group Ltd jumped 4.1% after the country's fourth-largest lender said it was starting to see bad debt provisions bottom out.

The MSCI index of Asia Pacific stocks traded outside Japan slid 1.3%. The selling was widespread, hitting the consumer discretionary, energy, telecommunications and materials sectors.
Stock valuations questioned

Asian stocks are trading at a price-to-book valuation of 1.1 times, above the 30-year average of 0.7 times and around the same level at the peak of the last bull market.

Investors since March had been justifying the premium based on the region's growth prospects and its expected speedy recovery from the global downturn. Yet in August developed markets, such as the United States and Europe, have attracted investors away from emerging markets thanks to better economic data.

The Asian stock rally sputtered in July and August for two reasons, according to Mark Matthews, Asia Pacific strategist with Fox-Pitt Kelton in Hong Kong.

"The first is that the U.S. in particular and the developed world in general are experiencing economic recoveries that are more robust than previously expected. The second is that there is policy shift in China, and even the doves there are happy that asset prices are no longer rising quickly," he said in a note.
Yen for yen

In the currency market, the yen got an early boost on the clear-as-day election result, which eliminated any uncertainty about Japan's political leadership. The sharp selloff in Shanghai equities also supported the yen as dealers sought a safe haven.

The U.S. dollar fell 0.7% to ¥92.75, the lowest since July 13, and the euro dropped 1% to ¥132.28.

The sharp decline in Chinese stocks "has muddied the picture as well as to whether it's a reaction to the election victory or risk aversion. It's probably a bit of a combination of both," said a dealer at a European bank in Hong Kong about the yen strength.

The Australian dollar was off 0.6% to $0.8373, though was largely unchanged in August.

The yield on the benchmark 10-year U.S. Treasury note slipped to 3.43%, down sharply since hitting 4 percent on June 10.

The creeping rise of risk aversion in markets pushed down oil prices, with U.S. crude for October delivery down 0.7% to $72.22 a barrel. To top of page

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Saturday, August 1, 2009



After a sharp rally, this "bull" flag served as a breather before running off again in the same direction. You can see the volume ease up a bit in the beginning of the flag, but then pick up as it nears the top of the formation and blows through it.


"Bull" flag in an uptrend. Quick rally, short pause, blast higher. Volume dips in the flag and surges on the breakout.


"Bear" flag in a downtrend. After a big rout, the flag seemingly presents a chance to re-group before continuing in the same direction (down.) Volume diminishes during the pause and then rapidly expands on the continuation.


After a big dump, this "bear" flag sets the stage for another quick and even larger fall. Volume decreases considerably in the flag, but the break to the downside is accompanied by a big increase in activity.


"Bull" pennant in an uptrend. After a month long rally, the market takes a five day breather and continues even higher. Volume dips briefly and then picks up on the breakout.


How's that for a pattern? Remember from the preceding page; 'pennants look very much like symmetrical triangles, but are typically smaller in size (volatility) and duration.' After a near straight up advance, the market takes only three days before resuming the upmove. During those few days, participation drops off a bit, but comes back as the market explodes out of the pennant. (Take a look at all those gaps right before and right after the pennant. Obviously a very strong and convinced market!)


"Bear" pennant in a downtrend. This pattern came right after a 'bear' flag breakout. (Can you see it?) This pennant also presents only a brief pause before the market reasserts itself in the direction of the trend (down.) Volume dips in the pattern and jumps as the market breaks out and gaps lower.


"Bear" pennant in the beginning of a downtrend. After a dramatic two day plunge, the market has a short lived consolidation. The rout continues and the market collapses. You can see activity dry up in the pennant. The breakout though, was made on extremely heavy volume.

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