Author: Derek Higa

Derek Higa is a senior equity analyst and a lead for the APAC region and the Consumer Cyclical sector. He serves on the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets, and compiles Asia Watch, a weekly recap of regional investing news. Since joining William O’Neil + Company in 2005, he has lent his market expertise to alpha capture, product development, and historical studies on outperforming stocks. Derek graduated summa cum laude from California State University Los Angeles with a B.S. in Finance and Information Systems. He holds a Series 65 securities license.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia Ex Japan index (AAXJ) is consolidating below its 200-DMA resistance, a level it has not held above since August. Most major markets have rallied off October lows. We will turn more bullish if indices breakout to new highs or above key resistance levels.
  • Three markets, including Japan and South Korea, are in a Confirmed Uptrend. Three markets, including Hong Kong, are in an Uptrend Under Pressure. Seven markets, including India, China and Taiwan, are in a Rally Attempt.
  • Since 2020, growth stocks in Japan have led value stocks during prior periods when the Nikkei has rallied. Growth stocks also led by a slight margin heading into the rallies in November 2020 and March 2023. In the last two-months, growth is leading value by a slight margin. We expect to the outperformance of growth stocks to intensify should the Nikkei 225 breakout to new highs.
  • Additionally, in previous rallies, the number of stocks near pivot has been higher than the rolling one-year average heading into a rally. Currently, the number is below the rolling one-year average, which is not ideal. We are looking for an improvement in the number of stocks near pivot and a significant increase in weekly breakouts, in addition to a Nikkei 225 breakout to raise conviction in a sustainable rally. Refer to page 12 for near-pivot stocks from MSCI Japan sectors.
  • Highlighted Focus List Idea: Sojitz (NIIW.JP; 2768 JP)

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia Ex Japan index (AAXJ) is consolidating below its 200-DMA resistance. Most major markets are trading constructively. We recommend a gradual approach to increasing risk as indices break above resistance levels.
  • Six markets, including Japan and Hong Kong, are in a Confirmed Uptrend. Seven markets, including India, China and Taiwan, are in a Rally Attempt.
  • Among the major APAC markets, Japan, Taiwan and India are the most favorable in our view. They are trading less than 3% off highs, and the number of weekly breakouts are near 52-week highs. However, we would like to see an improvement in stocks near pivot, along with a spike in breakouts to raise conviction in a sustainable rally.
  • In Japan, the spread between value and growth has decreased with growth stocks leading in the near term. Large cap stocks, especially in Technology, are outperforming. Refer to page 12 for a list of near-pivot stocks in Japan.
  • In India, small caps are outperforming. We notice improving momentum in Health Care and Technology. Refer to page 13 for a list of near-pivot stocks in India.
  • Highlighted Focus List Idea: Sun Pharmaceutical Industries (TIC.IN; SUNP IN).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia Ex Japan index (AAXJ) retook its 100-DMA and is near its 200-DMA resistance. We recommend a gradual approach to increasing risk as market conditions improve. To remain constructive, major indices must hold above key moving averages.
  • Six markets, including Japan, Hong Kong and South Korea, are in a Confirmed Uptrend. Seven markets, including India, China and Taiwan, are in a Rally Attempt.
  • Over the past eight weeks, the TAIEX has outperformed other APAC markets, led by the Technology sector. There has been a gradual improvement in weekly breakouts in Tech stocks in Taiwan. Look for a continued increase in stocks near pivot, along with a sudden spike in breakouts to raise conviction.
  • Technology is entering the top-right quadrant of the APAC sector rotation chart (refer to page 11). By major APAC markets, Technology stands out in Taiwan and South Korea. Among Technology Industry Groups across APAC, semiconductor-related groups are leading. Refer to page 16 for stocks of interest in Technology across APAC.
  • Highlighted Focus List Idea: TSMC (TSM.TW; 2330 TT).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia Ex Japan index (AAXJ) bounced off recent lows and retook its 21- and 50-DMAs. We recommend a gradual approach to increasing risk as market conditions improve. Look for additional follow-through days and an increase in breadth to raise conviction in a sustainable rally.
  • Five markets, including Japan and Hong Kong, are in a Confirmed Uptrend. Eight markets, including India, China, Taiwan and South Korea, are in a Rally Attempt.
  • Hong Kong was upgraded to a Confirmed Uptrend. Year-to-date, there have been four failed follow-through days and the index has been making lower lows and lower highs. We want to see the Hang Seng index hold above prior lows and make higher highs for a meaningful change in trend. The index should rise and hold above its 50-DMA to turn constructive.
  • Breadth in Hong Kong has improved over the last two weeks. The Health Care and Technology sectors have outperformed other sectors based on median RS Rating and average price performance. Refer to page 9 for a list of stocks of Interest in Hong Kong.
  • Highlighted Focus List Idea: NetEase (NETE.HK; 9999 HK).

Buy RACE.IT; All-Time High Post Strong Q

Posted on by Derek Higa

Key points:

 

  • We reiterate our buy recommendation on Ferrari as the stock broke out of a stage-one, 15-week flat base on above-average volume after strong Q3 results.
  • Q3 shipments increased 8.5% to 3,459 units. Revenue increased 23% to €1.5B, beating estimates by 5%. EPS of €1.82 (+46% y/y) topped estimates of €1.61 by 13%.
  • The company is on track to achieve its revenue and EPS CAGR of 7% and 10.5%, respectively, over the next four years. This would be achieved by an exclusivity strategy to maintain strong demand for its cars and improve the average selling price by changing product mix and personalization features.
  • Good fundamental ratings: Good EPS Rank 84 and SMR Rating of A. Consensus expects double-digit EPS growth for 2023 and 2024.
  • Good technical ratings: RS line is at a 52-week high, with a RS Rating of 88 and an A/D Rating of B+.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia Ex Japan index (AAXJ) has made lower lows since August and is trading at a YTD low. We continue to recommend a cautious and defensive approach. Pay attention to ideas which have held support, are trading near pivot and have rising relative strength.
  • Japan is in an Uptrend Under Pressure. Eight markets, including China, Hong Kong and India, are in a Rally Attempt. Four markets, including Taiwan and South Korea, are in a Downtrend.
  • The Nikkei 225 retook its 21-DMA after the Bank of Japan left its short-term lending rate unchanged at -0.1% and made its yield curve control policy more flexible. Key resistance for the Nikkei is near its 50-DMA (32,000).
  • The TOPIX’s outperformance over the Nikkei 225, on a three-month rolling return basis, is pulling back from the most extended levels seen over a 10-year period. Based on history, we expect the TOPIX’s outperformance to revert even further. This is despite value stocks holding up relatively better than growth stocks, since the Nikkei peaked in early September.
  • Breadth has weakened across Japanese sectors over the past eight weeks. Weekly stocks near pivot have sharply declined and the number of failed breakouts is on the rise. Reduce exposure to lagging stocks or those breaking below key support. The Consumer Staple and Financial sectors have improved the most over an eight-week period based on median RS Rating. Refer to page 12 for stocks of interest in Japan.

 

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia Ex Japan index (AAXJ) declined below recent lows of ~$62. Breadth across APAC is weak.
  • Japan is in an Uptrend Under Pressure. Three markets are in a Rally Attempt. Nine markets, including Hong Kong, India, China and Taiwan, are in a Downtrend. We shifted Hong Kong to a Downtrend from an Uptrend Under Pressure.
  • We downgraded India to a Downtrend from an Uptrend Under Pressure. The Sensex has breached its 100-DMA support for the first time since April. Breadth has weakened significantly over the past week. We see weakness across market cap classifications, with SMID stocks pulling back the most.
  • Indian markets have seen strong money inflows from institutions since February 2023. However, institutions have turned net sellers in September and October. Failed bases in India are increasing and the number of stocks near pivot has seen a sharp decline over the last week. We advise a cautious and defensive approach. Reduce exposure to lagging stocks or those breaking below key support levels. Refer to page 10 for a list of defensive stocks across APAC.
  • Highlighted Focus List Idea: Creditaccess Grameen Ltd (CRG.IN; CREDAG IN).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia Ex Japan index (AAXJ) retook its 21-DMA resistance. The index has been living below its 50- and 200-DMAs since August.
  • India is in an Uptrend Under Pressure. Ten markets, including Japan, Hong Kong and Taiwan, are in a Rally Attempt. China and South Korea are in a Downtrend.
  • Breadth across APAC has weakened over the past four weeks. The Technology, Consumer Cyclical and Capital Equipment sectors have seen a large decline in stocks trading above their 200-DMA over the past 13 weeks. All major markets except India have seen a decline in breadth. We recommend a cautious approach. Be patient and wait for follow-through days to occur before gradually allocating capital.
  • The Energy sector has been performing well across markets over the last 13 weeks due to an increase in crude oil prices. Much of the sector’s outperformance in APAC is driven by stocks in India, Japan and Australia. The Oil & Gas Exploration and Production and Coal industry groups have outperformed over the last 13 weeks. Refer to page 8 for mini charts of stocks of interest from the Energy sector.
  •  Highlighted Focus List Idea: NHPC (NHD.IN; NHPC IN).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia ex Japan index (AAXJ) is trading below all key moving averages and is at 10-month low. We recommend a cautious or defensive approach. Trim or reduce risk in ideas that are extended, or that are failing to hold above logical support levels.
  • India is the only market in an Uptrend Under Pressure. Six markets, including China and Taiwan, are in a Rally Attempt. Six markets, including Australia, Hong Kong, Japan, South Korea and Thailand, are in a Downtrend.
  • This week we downgraded Japan to a Downtrend from an Uptrend Under Pressure. This is the most extended the TOPIX has outperformed the Nikkei 225 on a three-month rolling return basis over the last 10-years. In the short term, we expect this to revert.
  • Year-to-date, low P/S stocks continue to outperform in Japan. Large-cap stocks have also led. However, these two groups have significantly underperformed over the last two weeks. We continue to recommend trimming positions in extended stocks or those breaking support levels. Refer to pages 8 and 9 for mini charts of extended stocks. The stocks that are holding up well in Japan are listed on page 10.
  • Highlighted Focus List idea: Resona Holdings (DBHI.JP; 8308 JP).