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:
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.
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.
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.
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’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’s Straits Times index has been in a bull market after suffering a correction during May-Jun ‘12.
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.