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The Global Recovery, Asian-Style

03/26/02 10:12:26 AM
by David Penn

Revisiting Asian Tigers as the recovery takes hold in the U.S.

Security:   TFT, SGF
Position:   N/A

When I last looked at Asian markets ("Asian Tigers Unite!" January 31, 2002, Advantage), I was struck particularly by the advances in ex-Japan Asia funds--countries like South Korea, Taiwan and Malaysia that looked to be outperforming Japan. In the near two months since, both South Korea and Malaysia have continued to climb, with South Korea (as measured by the iShares MSCI South Korea Index fund--EWY) up about 12.5% since the end of January and Malaysia (as measured by the iShares MSCI Malaysia Index fund--EWM) up close to 9.5%. Even Taiwan (iShares MSCI Taiwan Index fund--EWT) is up 4.5% over the same two-month period.

Turning to longer-term, weekly charts of these and other ex-Japan Asian markets only underscores the bullishness of many Asian markets going into 2002. One of the most impressive markets in this regard is in Thailand, where shares of the Thai Fund (TFT), a closed-end fund specializing in Thai equities, have appreciated 17% since the end of January and are up a whopping 56% year-to-date. The Thai Fund has been in a bear market since the summer of 1999 when shares of the fund were trading at about 11. The bear market was most destructive in the second half of 1999 and throughout 2000, as the Thai Fund lost about 78% of its value. 2001, as the chart shows, was largely a base-building year for Thai stocks, as the Thai Fund bounced around the bottom between 2.5 and 3.75 for an entire year. It was not until a break on the upside of the 30-month downtrend line very late in 2002 and a further move above the consolidation range highs at 3.75 that Thai stocks--as measured by the Thai fund-- finally snapped out of their bearish mode.

Singapore and Thailand are among the Asian tigers on the rebound in 2002.
Graphic provided by: MetaStock.
Other ex-Japan markets have done well, but the performance of the Thai Fund does tend to stick out somewhat. This is in part because of the sizable base the Fund developed in 2002, which makes the current advance appear more sustainable. Other ex-Japan funds, such as the Singapore Fund (SGF) and the First Philippine Fund (FPF) have been impressive, with the Singapore Fund up 19% year-to-date and the First Philippine Fund up 25% year-to-date. But their bases are nowhere as extensive as the base in the Thai Fund. Both the Singapore Fund and the First Philippine Fund look to be heading into resistance in the form of early 2001 consolidations. In the case of the Thai Fund, its 2001 "consolidation" was actually a part of the bottoming process, not a higher stop on the way down, as was the case with the Singapore and First Philippine Funds.

At last look, the Singapore Fund did look to be making progress above resistance at about 5.75--although a retracement of some order looks to be taking place as well. In this regard, the First Philippine Fund still has some work on the upside to accomplish. Should both the Thai and Singapore Funds hold onto their gains, this might bode well for the current advance in the First Philippine Fund. An advance to 3.75, and then a run on resistance at about 4.5, would represent a significant achievement for First Philippine.

As for the other "Tigers," we see in South Korea (EWY) a base-building that more resembles what the Thai Fund is experiencing, a good omen for the latter. In Taiwan the base is more of the "touch-and-go" of the First Philippine Fund. And as I might expect, Taiwanese equities (EWT) are moving more sluggishly up and out of their base as a consequence. Somewhat in the middle are the Malaysian stocks (EWM), which have a double-bottom like base that perhaps resembles most the Singapore Fund. Here, while not racing to higher highs, the double-bottom base appears to be sizable enough to support a test of the October 2000 high of 6.0.

David Penn

Technical Writer for Technical Analysis of STOCKS & COMMODITIES magazine,, and Advantage.

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