CHINESE AND INDIA STOCK MARKETS MAKE ASIA A GOOD PLACE TO BE INVESTING

INDIA HAS BEEN A WORLD LEADER ... I've received requests to look at some of the world's leading foreign markets. I thought I'd take the opportunity to look at some the big Asian leaders that I haven't written about before. This is also a timely subject following my trip to Europe last week where I saw some of these markets analyzed by foreign chartists. Right at the top of the list is India. It's been the world's strongest market over the last four years. Chart 1 shows the India Bombay 30 Sensitive Index (BSE) trading at a new record high. The blue line is a 20-month exponential moving average which has acted as a support line since 2003. Not surprisingly, the 14-month RSI is in overbought territory. The relative strength ratio along the bottom is the BSE measured against the Dow Jones World Index (DJW). It shows India's outperforming the world since 2001. Interestingly, the other big Asian giant -- China -- has been a global laggard.

Chart 1

MAINLAND CHINA HAS BEEN A LAGGARD ... Chart 2 plots the Shanghai Stock Exchange Composite Index (SSEC). There's good and bad news. The bad news is that mainland China has been a global laggard since 2001. The good news is that's it's just exceeded its 2004 peak and is trading at a five-year high. Its relative strength ratio shows new global leadership during 2006. The problem with mainland Chinese stocks is that they're largely government owned and foreign investment isn't easily achieved. Which brings to the much more accessible Chinese stock market in Hong Kong.

Chart 2

HONG KONG BREAKS OUT TO NEW RECORD ... Chart 3 plots the Hong Kong Hang Seng Index (HSI). The monthly bars show the HSI in the process of breaking through its 2000 high to achieve a new record. Its relative strength ratio, which has been moving sideways for five years is starting to climb as well. Of the three charts shown here, Hong Kong appears to be in the best technical condition. It's also much easier to trade through mutual funds and an Exchange Traded Fund. Chart 5 shows the Hong Kong iShares (EWH) also breaking through their 2000 peak. The reason the two charts look so similar is because the Hong Kong Dollar is pegged to the U.S. Dollar. As a result, there's no currency influence to distort either chart.

Chart 3

Chart 4

FIDELITY HONG KONG AND CHINA FUND ... One of the strongest international Fidelity funds this year has been the Hong Kong and China Fund (FHKCX). Chart 5 shows it trading at a new record high. In fact, most of the year's international mutual fund leaders are located in the Asian region. You can take a look for yourself in the Fidelity Fund Carpet. I'm not suggesting that any of these Asian markets are cheap (although China looks less expensive than India). They'll be subject to downside corrections like any other region (especially if and when the U.S. market weakens). What I am suggesting is that's where the most global growth is taking place which is a trend that should continue for years to come. It should be worthwhile find a way to have some stake in Asia's future -- especially in China and India.

Chart 5