A Tale Of Two Emerging Markets
Kunal Saraogi, CFT
In this article we take a look at the charts two of the most interesting market indices in Asia- Nikkei 225 of Japan and Hang Seng of Hong Kong. We try to understand how these markets are poised and which they are likely to head in the future.
Let us first look at the monthly chart for the Hang Seng below. This chart indicates a continuing uptrend that has validated the current trendline on several occasions. Despite having corrected significantly from the top of 31500 the index continues to trend upwards with no real signs of weakening of the upward momentum. Long term investors can therefore continue to stay invested in this market and with a predetermined exit level of below 22000
If American economy tail spins into a major recession all most all markets will see the impact of that. Hang Seng to will not be able to escape unscathed. Whenever that happens however this trendline will break giving a clear and unmistakable signal to exit this market. Till then hold on and enjoy the ride.
Now let us turn our attention to the pearl of the orient Japan and see how that markets stacks up against the rest of its Asian peer more particularly against Hong Kong.
Nikkei 225 of Japan has seen an all time high of over 40000 in the 1980s and a low of sub 8000 levels in 2003. The index has had an impressive recovery since and now trades at more respectable 13000 levels. The index however has had more than its fair share of weakness in the current global corrective cycle ad has lost close to 5000 points from its recent intermediate top. Clearly Japanese markets look a bit softer than Hong Kong which has held out nicely despite all around weakness and general slowdown.
Investors facing a choice between these two markets should without a doubt chose Hong Kong which has more robust uptrend and a more promising future.
