The slowdown in economic growth in USA and Eurozone countries had a huge impact on the economies of many Asian nations – particularly those that were heavily dependent on inbound tourism and exports to North America and Europe.
Many of these Asian countries are geographically small in size and do not have a sufficiently large population that can sustain growth through domestic consumption. They suffered the most.
Even in China, which is large both in size and population, export-fuelled growth has slowed down somewhat – though growth remains quite high by global standards. The interesting thing to observe is that most stock market indices have suffered less than the respective economies.
This may partly be due to the flood of liquidity unleashed by quantitative easing programmes in USA and Europe. It may also be due to the realisation among investors that the worst is over and growth can only improve from now on.
Here is a look at the one year charts of Asian indices:
Shanghai Composite
The Shanghai Composite shows the greatest disconnect between the state of the economy and the stock market. The economy is still growing better than most in spite of some slowdown – but the index was deep in a bear market till Nov ‘12. Even after briefly returning to bull territory, it has formed a head-and-shoulders reversal pattern that can push the index down below its 200 day EMA.
Hang Seng
The Hang Seng index suffered at the hand of bears from May ‘12 to Aug ‘12, and is currently undergoing some profit booking. But it is clearly in a bull market.
Taiwan TSEC
The Taiwan TSEC index suffered a bear phase from Apr ‘12 to Nov ‘12, but has re-entered a bull market. The index has just about recovered its losses during the year.
Jakarta Composite
Despite a brief drop into bear country during May-Jun ‘12, the Jakarta Composite index has been in a long-term bull market and an outperformer among Asian indices.
Malaysia KLCI
Malaysia’s KLCI index has been in a year-long bull market, but it has been a volatile rally with occasional dips below its 200 day EMA.
Singapore STI
Singapore’s Straits Times index has been in a bull market after suffering a correction during May-Jun ‘12.
Korea KOSPI
Korea’s KOSPI index had a long struggle with the bears, but seems to have returned to a bull market for the past 3 months. It has failed to make any gains during the past 12 months.
2 comments:
Good points......The decoupling is going to take a few decades UNTIL the local economies can sustain local GDP growth based on the local consumptions. Today, the exports from these countries are huge in % of GDP and hence, when US or EU gets a cold, some economies get a flu.
India and China have the BEST option available but for that to happen, the black markets and the high savings rate are two things that have to change quickly. The younger generation is doing that, but there still is a large amount controlled by the 35+ age group where savings is a high priority.
KKP
Unfortunately, Communist govt. in China and Socialist govt. in India 'know what is best' for their respective populations. That means policies that ensure the longevity of the governments and stifling any opposing views by hook or by crook.
China has progressed more because they started reforms earlier and have a non-democratic set-up that has pushed through reforms more readily.
India has a deadly cocktail - no education, no infrastructure and an Opposition (regardless of their colours) that is more interested in winning brownie points than in nation building.
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