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) breached support along March lows of $63.4 and is 14% off highs. We recommend a cautious or defensive approach. If you must allocate capital, focus on ideas with an improving RS Rating or a high 3-month RS Rating.
  • Three markets, including Japan and India, are in an Uptrend Under Pressure. Seven markets, including China and Taiwan, are in a Rally Attempt. Hong Kong, South Korea and Thailand are in a Downtrend.
  • Major APAC markets, except Japan, have seen an increase in failed bases over the past month, compared with the one-year average. Fewer stocks are forming bases. Noticeably, the number of stocks forming bases in Hong Kong is near a seven-year low.
  • The Hang Seng undercut prior lows and was downgraded to a Downtrend. It is more than 20% off 52-week highs and continues to live below the 50- and 200-DMAs. Refer to page 8 for an annotated chart of the Hang Seng. We recommend investors trim positions in stocks breaking below logical support. Refer to page 10 for minicharts of shortable Chinese ADRs.
  • Breadth in Hong Kong remains low across sectors. However, we have identified a few pockets of resilience in selected Industry Groups. We recommend investors focus on constructive stocks trading above key moving averages with rising relative strength. Refer to page 12 for a list of constructive setups for stocks in Hong Kong, Taiwan and South Korea.
  • Highlighted Focus List Idea: PDD Holdings (PDD).

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 50- and 200-DMAs. We recommend a patient approach. Continue to let markets settle and prove they can break out or hold above key levels before allocating capital.
  • India and Japan are in a Confirmed Uptrend. Three markets, including Australia and Hong Kong, are in an Uptrend Under Pressure. Six markets, including South Korea and Taiwan, are in a Rally Attempt. New Zealand and the Philippines are in a Downtrend.
  • The TOPIX has become extended from a historical perspective. While the Nikkei 225 is trading within consolidation and is 2% below its June and 52-week high, the TOPIX has broken above June highs and has made a new 52-week high. It is also trading near historically extended levels above its 40-WMA.
  • In Japan, Energy and Utility are among the most extended sectors. Most other sectors, except Health Care and Consumer Staple, are trading more than 10% above their 200-DMA. Refer to pages 10 and 11 for minicharts of extended names in Japan.
  • The Consumer Cyclical, Capital Equipment, Technology and Financial sectors are responsible for 80% of the YTD performance of all liquid stocks in Japan. Given the extended nature of some areas of the market, we recommend a disciplined approach. Avoid or trim extended ideas. Instead, focus on stocks trading near pivot off constructive bases. Refer to page 12 for a list of stocks trading near pivot in Japan.
  • Highlighted Focus List Idea: NTT (NTT.JP; 9432 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 50- and 200-DMAs. We recommend a patient approach. Let markets settle and find support before allocating meaningful capital. Focus on ideas trading constructively above key moving averages with rising relative strength.
  • Indian small- and mid-cap (SMID) stocks are extended from a historical perspective and are overdue for consolidation. We recommend investors avoid chasing extended Indian small- and mid-cap stocks. The Nifty Midcap 100 index has outperformed the Nifty 50 in recent months, and the price spread between the two indices is at an all-time high. The current spread is close to Jan 2018 levels, when the Nifty midcap index peaked and consolidated for the next two years, while the Nifty 50 index outperformed. Based on historical performance, we expect the spread between the indices to narrow going forward.
  • In India, cumulative domestic institutional buying has slowed over the last five months, and foreign investors have continued to be cumulative net sellers. We believe that the recent rally in SMID stocks has been primarily driven by retail investors. In contrast, large-cap stocks are less extended and multiple ideas are breaking out. Refer to page 8 for a list of constructive large-cap stocks.
  • Highlighted Focus List Idea: Maruti Suzuki India (MUD.IN; MSIL IN). Refer to page 7 for an annotated chart.

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 its support level along March lows of $63.40 and is currently close to resistance along the converging 50- and 200-DMAs. We recommend a cautious approach. Gradually allocate capital to ideas breaking out of sound bases, or trading constructively above key moving averages with rising relative strength.
  • Japan and Hong Kong are in a Confirmed Uptrend. Three markets, including India and Australia, are in an Uptrend Under Pressure. Seven markets, including China, Taiwan and South Korea, are in a Rally Attempt. The Philippines is in a Downtrend.
  • The MSCI Japan Value index continues to outperform the growth index in the near term, while breadth has improved over the past week. Look for an increase in the number of breakouts to raise conviction in a sustainable rally.
  • Stocks with higher revenue exposure outside Japan have outperformed and have a higher median RS Rating compared to all liquid stocks in Japan. Refer to pages 10 and 11 for mini charts of notable large caps with high revenue exposure outside Japan.
  • The Energy and Utility sectors lead in Japan based on median RS Rating. Retail, Financial and Consumer Staple have improved noticeably over the past four weeks. Refer to page 12 for a list of stocks near pivot.
  • Highlighted Focus List Idea: Chiba Bank (CHBK.JP; 8331 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) has declined below its 200-DMA and is testing key support level along March lows of $63.4. We recommend a cautious approach. Continue to be patient and wait for follow-through days before increasing risk. Focus on stocks with rising relative strength within improving industry groups.
  • Three markets, including India and Australia, are in an Uptrend Under Pressure. Five markets, including Japan, Taiwan and South Korea are in a Rally Attempt. Five, including Hong Kong and China, are in a Downtrend.
  • In the APAC sector rotation chart on page 8, Energy is in the top-right quadrant, indicating outperformance and improvement over four and 26 weeks. Upside momentum in Utility, Financial and Retail is also notable. Past outperformers, such as Technology, Capital Equipment and Consumer Cyclical, are losing momentum in the short term.
  • There are pockets of strength across major markets, as displayed by improving momentum in selected industry groups. Refer to page 9 for a table of the top four Industry Groups by market, with the most improvement in median RS over four- and eight-weeks. We have also highlighted notable themes across major markets on pages 3 and 4. Refer to page 12 for a list of near pivot stocks from improving Industry Groups.
  • Highlighted Focus List Idea: Indian Hotels (INH.IN; IH IN). Refer to page 7 for an annotated chart.

APAC Market Update

Posted on by Derek Higa

Attached is a note on APAC from Derek Higa, Research Analyst, Director of Global Equity Research, William O’Neil + Co.; Pavan HK Kumar, Equity Research Analyst, William O’Neil India; and Roshan Balaji Mishal, Equity Research Analyst, William O’Neil India.

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 breached its 200-DMA. Next support is near $64. Major indices are under heavy selling pressure and are testing support levels. Reduce risk in ideas breaking below logical price support on above average volume. Selectively focus on ideas with rising relative strength and constructive price action.
  • India is in a Confirmed Uptrend. Eight markets, including Japan, Hong Kong and China, are in an Uptrend Under Pressure. Three markets are in a Rally Attempt, and one is in a Downtrend. APAC markets are consolidating.
  • Small-and mid-cap (SMID) stocks are outperforming across APAC ex China. This trend is most pronounced in India. Among SMID stocks in India, low P/E stocks are leading over the short term. We recommend investors be selective regarding Indian small- and mid-cap stocks as they are very extended.
  • For SMID stocks across APAC, outperformance has been driven by the Energy and Retail sectors. Among SMID stocks, stocks with higher EPS Rank have outperformed. Refer to page 10 for a list of near-pivot small- and mid-cap stocks in APAC ex-China.
  • Highlighted Focus List Idea: Dixon Technologies (DIX.IN; DIXON 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) broke above resistance between $68 and $69 earlier in the week, then retraced gains on Wednesday. We have a positive view of APAC markets. Look for indices to hold above short-term moving averages. Focus on ideas with rising relative strength and constructive price action.
  • Eight markets, including Japan, Hong Kong, India and China, are in a Confirmed Uptrend. Taiwan is in an Uptrend Under Pressure. Four markets, including Indonesia, are in a Rally Attempt.
  • Over the last ten years, the Nikkei gained 40% while the Topix gained only 2%. The spread between the two indices has increased significantly since 2019. Recently, the TOPIX made a new 52-week high, while the Nikkei has yet to retake its high. The recent TOPIX outperformance has been accompanied by outperformance of the MSCI Japan value index over the growth index.
  • Stocks with a lower price to sales (P/S) ratio continue to lead in Japan. Year-to-date outperformance is still being driven by large cap stocks. However, over the last four weeks, mid and small cap stocks have outperformed. Rotation into the Retail, Basic Material and Health Care sectors is noticeable during this period. Refer to page 10 for stocks near pivot in Japan.
  • Highlighted Focus List Idea: Shift (SHFT.JP; 3697 JP). Refer to page 7 for an annotated chart.