Emerging Asia’s experience of the past two decades has, in many ways, been the inverse of Western Europe’s and North America’s. While Western stock markets boomed during the late 1990s, emerging Asia’s collapsed in a large-degree bear market that was for many people even more painful than the one that many Europeans and Americans face now.
This chart shows how the Asian Financial Crisis of 1997-1998 plunged many Asian stock markets 70% or more off their highs and devalued many Asian currencies by 30% or more. The crisis was so frightening that at least 100,000 South Koreans donated a total of more than USD $150 million worth of their personal gold holdings to help their nation repay its loans to the International Monetary Fund. In Indonesia, where the currency plunged in value as much as 85% against the US dollar, the crisis forced the resignation of a dictator, Suharto, who had reigned for 31 years. And in western, central, and southeast Asia, the large-degree bear market brought extraordinary power and influence to an Islamic anti-hero, Osama bin Laden, whose agents attacked targets in the United States in 2001. This last event happened just two weeks before the wave C low in the MSCI Asia Ex-Japan Index’s (NASDAQ:AAXJ) wave IV triangle.
Since then, North America and Western Europe have endured long bear markets, and Japan has continued its own bear market. In contrast, emerging Asia has launched into a multi-decade, impulsive advance that is not yet even half over by our calculations. Yet its effects have already altered the global order. China’s economy has grown to become the world’s second largest, and analysts wonder when it will overtake America’s. Many Asian multinationals — such as South Korea’s automobile and electronics manufacturers and India’s steel and infotech companies — rank among the world’s biggest and best. The Wall Street Journal
reports that Indonesia now has more billionaires than Japan. Myanmar’s dictators have ceded power after 50 years — voluntarily
. As for Osama bin Laden, the bull market (and US armed forces) killed him off just two trading days after the wave (1) high in the Asia Ex-Japan Index, which had increased 2.5 times in just 2.5 years. The bull market continues to marginalize Al Qaeda’s influence in Asia.
Elliott Wave International launched The Asian-Pacific Financial Forecast
during the 2008 financial crisis, but even in the darkest days of that crisis, we were aware that it was coming to an end in emerging Asia. Less than a week after the October 2008 lows in many emerging markets, our November 2008 issue compared the low then to the 2001 low and said that the “current juncture may mark a similar point of divergence for the region.” For example, we said that India’s wave 2 (circled) correction was likely over and that Indian stocks would probably continue advancing for 15 years before reaching the end of wave 5 (circled). The developed world’s stock markets continued falling to new bear market lows in early 2009, but emerging Asia’s markets diverged upward. In line with our bull market forecast, many emerging markets have since outperformed the developed markets, with some advancing several hundred percent.
The price action in the region since the 2008-2009 lows has only added evidence to support our long-term bullish forecast for emerging markets. The price action in 2013 should further support our forecast, as most of the region’s markets are now advancing in large-degree third waves. Emerging Asia’s bull market since the early 2000s is now in its 11th year. This year should be the best yet.
Editor's Note: This article by Mark Galasiewski originally appeared on Elliott Wave International.
No positions in stocks mentioned.