by Alexandra Lienhard
Updated: May 10, 2017
Mark Galasiewski, the editor of our Asian-Pacific Financial Forecast and contributor to Global Market Perspective, tells you what to make of the recent price action in Australia, Korea and Japan.
Alexandra Lienhard: Today on ElliottWave TV, I'm joined by Mark Galasiewski, the editor of Elliott Wave International's Asian-Pacific Financial Forecast, and contributor to the monthly Global Market Perspective. Hi Mark, nice to see you.
Mark Galasiewski: Hi Alex.
AL: So, in looking at Australian stocks, they've been modestly bid. And as you've recently pointed out, just bumped up against a very important long-term trend line. So in your view, has that market topped?
MG: Well, the All Ordinaries is bumping up against a long term resistance line, uptrend line, drawn from the 1974 low in the index, in fact. As to how much of a ceiling that uptrend line represents, I will let subscribers read about that in the May issue. But one piece of evidence that we consider in the newsletter that I can discuss here today is Westpac's leading index of economic conditions. The indicator hit a record low in late 2016, and that gives you an indication of how bad things have gotten in Australia recently. It's important to consider how stocks behaved after the indicator hit record lows in the past, and we discussed those precedents in the May issue in the context of the wave count for the All Ordinaries.
AL: Now Mark, the cost of the index has been lagging many Asian markets, given that it's been range bound for the past five to six years. Now it's finally broken out to the top side, despite tensions with North Korea, despite the recent presidential election. So what's your longer term view for Korean stocks, and how do you factor in these external issues into your analysis?
MG: Well, I'll address the second part of that question first, Alex. External issues in no way influence our forecasts for South Korean stocks. In the case of South Korean stocks, the long term patterns are indicating that the uptrend in the market is far from complete, but as to how much further prices will rise in the intermediate term, I addressed that in greater detail in the recent issue.
AL: And many Japanese assets have been moving in tandem for the last 12 months. For example, dollar-yen, stocks and bonds. You've have managed to stay a step ahead of these presumed correlations. So in your view, is inner market, inner play actionable, or even sustainable?
MG: Actionable, yes. As to sustainable, I will say that we at EWI understand that market relationships are temporary market phenomenon. That is, in this case, the three asset classes are trending together, but those correlations will eventually break down. And indeed, the long-term patterns in the three indexes do indicate that the correlation will break down in the future. But for the moment, they are trending together, and in which direction that trend is headed, I will let subscribers read about that in the May issue.
AL: And Mark, the last thing I wanted to mention is that the Asian-Pacific Financial Forecast, which you edit, and Global Market Perspective, are now offering regular coverage of not just stocks, but of currencies and interest rates for major Asian-Pacific markets.
MG: That's right. We offer monthly coverage for currencies and interest rates and stocks in China, India, Japan, and Australia. And on a quarterly basis, all three asset classes in Hong Kong, Singapore, South Korea and Taiwan.
AL: And looking specifically at the Hong Kong dollar which is pegged to the US dollar, you don't currently publish on that currency relationship yet. Is that correct?
MG: Yes, that's right. That is the one exception, but we do monitor it internally. You never know what's going to happen with China increasing its influence in the region.
AL: And speaking of China, one thing that you speculated in the past is that if the Chinese Yuan were to continue falling to parity with the Hong Kong dollar, China might merge the two currencies. Is that still the case?
MG: Yes, it's just speculation for now, but it would send a strong political message to Hong Kong's pro-independence camp.
AL: Well Mark, thanks for taking a couple of minutes to offer these insights.
MG: OK Alex, thank you.