East Asia's on Fire

10/04/2010 9:20 am EST


Gregory Weldon

President and CEO, Weldon Financial

Hong Kong and Taiwan are joining a boom that swept up Indonesia and the Philippines long ago, writes Gregory Weldon of Weldon’s Money Monitor.Observe the weekly overlay chart below in which we compare the longer-term relative r

ates of return posted over the last decade by four emerging Asian equity indexes and the US Standard & Poor’s 500 index. Simply stated, the US has lagged, dramatically. Asian markets have significantly outperformed.

Moreover, a host of Asian equity markets that we have been following throughout the course of 2010 have soared to new record highs. Asian stock markets, ex-China and Japan, are on fire. Indonesia has led the way higher, rising 403.7% since the beginning of 2000, with a 212.1% gain since the low set on October 28, 2008, including a  return of 36.8% [so far this year] and a new all-time high. (Charts reprinted with permission of Weldon’s Money Monitor—Editor.)

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The Philippine stock index is outperforming even the Indonesian index, by posting a 44.2% year-to-date gain, though it lags Indonesia relative to the October 2008 low, with a gain of “only”160.1%. Indonesia and Philippines are among the world’s leading movers in 2010.

The move to new highs in Asian stock indexes comes with full fundamental support. Hong Kong trade data revealed a record high in exports. [These reached] HKD 154.8 billion thanks to a huge 12.1% month-month expansion posted during August.

On the back of record exports, record growth in exports, and record imports, the Hong Kong stock market is on fire as well.

Note the long-term weekly chart revealing a new bull move breakout high in the iShares MSCI Hong Kong Index ETF (NYSE: EWH), in synch with the bullish technical [patterns], as the EWH spikes to a new all-time high relative to the S&P 500.

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[Meanwhile, Taiwan’s] money supply and bank lending data revealed an all-time high in bank loans outstanding on the back of a sizable 0.95% single-month increase, led by an oversized 1.1% month-month expansion in private-sector loans. The rise was fueled by a broad expansion in lending, including another increase in loans for home purchases, which rose to 5.054 trillion Taiwan dollars, a new record.

We observe the upside breakout taking place in the Taiwan stock market, as defined in the long-term chart below plotting the iShares MSCI Taiwan Index (NYSE: EWT). We shine the spotlight on the bullish moving average,  the violation of the down trend line in place since the 2008 peak, and the completion of a 38% Fibonacci retracement relative to the 2009-2010 bull move. (Fibonacci indicators are used by technicians to evaluate the strength and durability of rallies and corrections—Editor.) We have added Taiwan to the list of “bullish trending” Asian stock markets.

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We remain bullish on select Asian stock indexes and currencies, with specific focus on Indonesia, Malaysia, Thailand, and Singapore, along with the Philippines and Taiwan.

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