The historic performance of US stocks in 2019 is all the buzz heading into year-end. But it’s not only US Equities that deserve attention as indexes all over the world have been making new highs recently. Last week, we discussed the strength from European Equities in our post A Trip Around Europe and today we are going to look at the recent strength out of Asia.
Asia has by no means been a top performer. In fact, one might argue it has been the weakest region among International Equities over both short and long-term timeframes. And that is exactly what makes its recent price action so important in my mind. You know you are in a true global bull market when even the weakest countries and areas of the world are making new highs, and this is exactly what we’re seeing out of Asia right now.
This is the iShares Asia 50 Index ETF ($AIA) resolving above key resistance at prior price peaks to its highest level since last summer. The Asia 50 Index is a broad representation of the region, with a focus on Hong Kong, Taiwan, South Korea and Singapore – the four highly developed economies of East Asia, excluding Japan. This collection of countries is commonly referred to as the “Four Asian Tigers,” a title they earned due to their high growth rates and rapid industrialization experienced from the 1960’s to 1990’s.
With top holdings including Tencent, Samsung and Taiwan Semiconductors, the Index definitely provides ample exposure to Technology as South Korea and Taiwan have emerged as two of the most prominent IT hubs around the globe. And as Hong Kong and Singapore are two of the world’s leading financial centers, the Index also has plenty of exposure to Financials with holdings from Ping An Insurance Group and the Hong Kong Clearing Corp, to some of China’s largest banks. Thus the Index is not only diversified by region but also by sector.
The main takeaway here is that the most export-dependent Asian economies are literally making fresh highs despite the onslaught of negative headlines about how China (and Asia more broadly) is losing the “Trade War.” It’s always worth paying attention when price action diverges from the narrative, and this is an extreme case of just that. Sentiment remains exactly where bulls want it while the expansion in breadth among global equities continues to impress. Frankly, bears have fewer talking points with each passing session.
Hope you enjoyed this post! As always, reach out to me at Strazza@thechartreport.com with any questions or comments.