Shanghai: SSE Composite Index (.SSEC) markets there have lagged the performance of the wider benchmark

Shanghai: SSE Composite Index (.SSEC) markets there have lagged the performance of the wider benchmark

Shanghai: SSE Composite Index (.SSEC) markets there have lagged the performance of the wider benchmark

Underneath the surface of the solid stock-market rally across Asia, there’s one spot where investors are seeing signs of some sputtering: Southeast Asia.

Despite strong economic growth and bullish expectations for the future, markets there have lagged the performance of the wider benchmark. The MSCI Asean Index, which includes Indonesia, Singapore, Malaysia, the Philippines and Thailand, is up just 4.7 percent this year, trailing the 8.2 percent gain in the wider MSCI Asia Pacific Index and the MSCI Emerging Markets Index’s 8.7 percent surge.

Foreign investors have already pulled almost $480 million out of equities from the latter three countries this month, with Indonesia bucking the trend by posting a modest $134 million inflow, data compiled by Bloomberg show. All four have seen withdrawals from U.S.-listed exchange-traded funds in recent days.

There’s plenty of potential factors that may be driving the relative equity weakness through the first two months of the year:

  • Progress made on a trade deal between the U.S. and China, while a net positive for the region given the stress on tightly connected supply chains across multiple export-driven economies, nevertheless dampens the long-term potential for Southeast Asia as a manufacturing haven for companies looking to shift production out of China on the threat of extended tariffs.
  • The U.S. dollar, which climbed 3.2 percent last year according to a Bloomberg gauge, has edged higher, even with the Federal Reserve adopting a more dovish stance. A strong dollar generally makes emerging-market investments less attractive, and the Asean index took it on the chin with its worst annual loss since 2015 last year.
  • MSCI Inc.’s decision to boost the weighting of China’s domestic A shares in its various indexes will lead to billions in flows as active and passive funds rebalance their positions in response. But that’s at the expense of other markets in the region. The Philippines has been hit especially hard by the decision, pulling back in the wake of the announcement after coming close to a bull market earlier this year.
  • Earnings in the region have disappointed. Citigroup Inc. just cut its target for Malaysia’s benchmark stock index, the poorest performer in Southeast Asia this year, due to downgrades in company price estimates as profit misses have outnumbered beats.
  • There are also upcoming elections in Thailand, Indonesia and the Philippines that add an extra dash of uncertainty.

Short-term concerns aside, the region still looks attractive to some investors.

After all, the economy in Southeast Asian nations has been expanding at a fast pace and, even though it’s slowing there too, it’s still an enviable growth. For this year, economists forecast gross domestic product will rise more than 5 percent in the Philippines and Indonesia, 4.5 percent in Malaysia and 3.8 percent in Thailand, data compiled by Bloomberg show. In Singapore, considered a developed market, it’ll increase 2.6 percent, they estimate.

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 2,805.83.

The projected upper bound is: 3,214.61.

The projected lower bound is: 3,019.41.

The projected closing price is: 3,117.01.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 32 white candles and 18 black candles for a net of 14 white candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 88.5325. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 85.19. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 10 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 112.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 22 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 38 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed up 4.319 at 3,106.418. Volume was 195% above average (trending) and Bollinger Bands were 179% wider than normal.

Open High Low Close Volume___
3,103.6683,129.9393,074.9793,106.41858,381,705,216

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 2,988.61 2,667.42 2,750.96
Volatility: 31 22 25
Volume: 46,552,825,856 22,374,424,576 16,083,639,296

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

SSE COMPOSITE is currently 12.9% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into .SSEC (bullish). Our trend forecasting oscillators are currently bullish on .SSEC and have had this outlook for the last 32 periods. Our momentum oscillator is currently indicating that .SSEC is currently in an overbought condition.

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