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 trading below its 50- and 100-DMAs. It has multiple levels of resistance along ~$67. We have a positive view of APAC markets. Focus on ideas that are trading within the pivot range of their bases, and that are holding above logical price support with rising relative strength.
  • Japan, India, Taiwan and South Korea are in a Confirmed Uptrend. Hong Kong is in an Uptrend Under Pressure. Seven markets, including China and Australia, are in a Rally Attempt. Thailand is in a Downtrend.
  • Look for markets, including Japan and Taiwan, to hold above near-term support levels to remain constructive. Chinese markets are trading below all their key moving averages.
  • Stocks with a higher RS Rating (>80) declined by more over the last two weeks than stocks with a lower RS rating. The larger decline was led by stocks in Hong Kong and Taiwan. However, we have not seen a major breakdown of leaders yet.
  • The Capital Equipment and Consumer Cyclical sectors are entering the top-right quadrant of the APAC rotation graph, indicating outperformance over a 26-week period and improvement in momentum over a four-week period. Refer to page 9 for a list of stocks near their pivots in these sectors.
  • Highlighted Focus List Idea: Tube Investments of India Ltd (TF.IN; TIINDIA 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) pulled back from a four-month high and is testing its 100-DMA support. We have a positive view of APAC markets. Continue to focus on quality growth ideas which are breaking out of sound bases. Avoid extended ideas.
  • Japan, India, Taiwan and South Korea are in a Confirmed Uptrend. Hong Kong is in an Uptrend Under Pressure. Eight markets, including China and Australia, are in a Rally Attempt.
  • The Sensex is trading close to an all-time high. Breadth across India is improving with 76% of stocks trading above the 200-DMA. Breadth is better across large and mid caps. However, small caps have outperformed over the past 8-26-weeks based on average price performance. Institutional investors have turned net buyers in 2023 after being net sellers last year.
  • In India, the Capital Equipment, Health Care and Retail sectors have outperformed based on their three-month RS Rating. We also see strength in certain Financial Industry Groups. Refer to page 9 for near-pivot ideas.
  • Highlighted Focus List Idea: Larsen & Toubro (LST.IN; LT IN).

APAC Market Update

Posted on by Derek Higa

Key Points:

 

  • We upgraded Hong Kong to a Confirmed Uptrend from a Rally Attempt after the Hang Seng index staged a day-10 follow-through day. The index rose 2.2% on volume higher than the prior session and cleared above its 50-DMA resistance. Refer to page 2 for the annotated chart of the Hang Seng index.
  • We advise investors gradually allocate capital and increase risk in Hong Kong. Look for improvement in breadth. Focus on stocks breaking out of sound bases with a rising relative strength. Refer to page 3 for a list of near pivot ideas in Hong Kong.
  • Large-cap stocks will need time to become actionable. Those setting up constructively above moving averages include Tencent (TCNT.HK; 700 HK) and Baidu (BAID.HK, 9888 HK).
  • We have a positive view of APAC markets. Strength has broadened to nearly all major markets. Five out of 13 APAC markets, including Hong Kong, Japan, India, and Taiwan, are in a Confirmed Uptrend. Eight markets, including Australia, are in a Rally Attempt.

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. We recommend a selective approach. Focus on ideas in constructive markets that are trading within the pivot range of recent bases with rising relative strength.
  • Japan, India, Taiwan and South Korea are in a Confirmed Uptrend. Nine markets, including Hong Kong, China and Australia, are in a Rally Attempt.
  • Breakouts over the last ten weeks were higher in APAC ex China compared to the U.S. and Europe. In APAC, breakouts have largely been similar across large, mid and small caps. However, the number of stocks forming bases is higher among large caps. Refer to pages 8-10 for a list of large-, mid- and small- cap stocks that are near pivot.
  • A higher proportion of breakouts have come from the Capital Equipment, Technology, Financial and Consumer Cyclical sectors. Nearly two-thirds of breakouts were in Japan and India. In terms of stocks forming bases, we are noticing a higher proportion from the Financial sector. Hong Kong stands out among major markets.
  • Highlighted Focus List Idea: CS Wind (CTW.KR; 112610 KS).

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 is 8% off-highs and is testing resistance along its 100-DMA ($68). Focus on markets in a Confirmed Uptrend and ideas which are trading within the pivot range with rising relative strength.
  • Japan, India, Taiwan and South Korea are in a Confirmed Uptrend. Seven markets, including Hong Kong and Australia, are in a Rally Attempt. China and Malaysia are in a Downtrend.
  • Japan is extended in the near term, but not as extended as it was in 2021. We expect the market to consolidate in the near term while broadening occurs.
  • Technology, Capital Equipment and Consumer Cyclical are the most extended sectors currently. These sectors account for 75% of year-to-date performance for liquid Japanese stocks. The Financial, Energy and Transportation sectors are less extended compared with 2021.
  • Refer to page 7 for stocks trading near pivot in Japan.
  • Highlighted Focus List Idea: Sysmex (TOAF.JP; 6869 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) fell below its 200-DMA and made two-month lows. Most major APAC markets remain constructive, while Chinese markets are weak. We recommend a selective approach. Focus on ideas that are trading within the pivot range of sound bases with rising relative strength. Refer to page 9 for a list of stocks near pivot in Confirmed Uptrend markets.
  • Japan, India, Taiwan and South Korea are in a Confirmed Uptrend. Six markets, including Australia and Singapore, are in a Rally Attempt. China, Hong Kong and Malaysia are in a Downtrend.
  • In the U.S., the relative outperformance of Technology has been pronounced. Similarly in APAC, outperformance is concentrated in the Technology and Capital Equipment sectors. We recommend investors avoid chasing extended ideas. Refer to page 8 for mini charts of examples of extended Technology stocks.
  • On a market cap-weighted basis, APAC stocks have gained 9.1% year-to-date on average. By sector and country, Technology and Japan accounted for around half of this price performance, respectively. Look for broadening or improvement in performance in more sectors and markets to provide higher conviction in the rally.
  • Highlighted Focus List Idea: TSMC (TSM.TW; 2330 TT).

Hong Kong Downgraded to Downtrend

Posted on by Derek Higa

We are downgrading Hong Kong to a Downtrend from an Uptrend Under Pressure.
The Hang Seng was down 1.9% on above average volume and undercut March lows
of 18,829. It added its seventh distribution day. It is now 17% off highs and below all
key moving averages after breaching its 200-DMA (19,342; +3%), yesterday. The
follow-through day on March 29 has failed. The index has been facing resistance
along its declining 50-DMA (19,876; +6%) since April. Next support is near March
2022 lows of 18,235 (-3%), followed by November 2022 lows of 16,834 (-10%).
See the annotated chart of the Hang Seng on page 2.

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 is testing its 200-DMA support. We recommend a selective approach. Japan is extended in the near term and is due for consolidation. Refer to pages 10 and 11 for mini charts of extended stocks in Japan. Focus on ideas with rising relative strength and trading within pivots of sound bases in constructive markets.
  • Japan, India and Taiwan are in a Confirmed Uptrend. Hong Kong and South Korea are in an Uptrend Under Pressure. Seven of 13 markets, including Australia, are in a Rally Attempt. China is in a Downtrend.
  • China’s Q1 GDP growth was ahead of estimates. This led to a short-term bounce in the CSI 300 and the Hang Seng index. However, the gains quickly faded following weaker PMI and industrial production data. There was much anticipation of growth driven by the reopening of the Chinese economy, which is yet to be reflected in companies’ sales performance.
  • The number of stocks breaking out is trending below the one-year average in China and Hong Kong. There is also an increase in the number of failed breakouts. We remain cautious regarding the Hong Kong market following the recent market action. Refer to page 9 for a list of Hong Kong stocks holding up well.
  • Highlighted Focus List Idea: Daiichi Sankyo (D@SA.JP; 4568 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 trading below its 50-DMA resistance and above its 200-DMA support. We recommend a selective approach. Focus on ideas with rising relative strength and breaking out of sound bases in constructive markets.
  • India and Japan are in a Confirmed Uptrend. Hong Kong, South Korea and Taiwan are in an Uptrend Under Pressure. Eight of 13 markets, including Australia and China, are in a Rally Attempt.
  • The Nikkei 225 is trading at a 52-week high and is approaching September 2021 highs. The TOPIX is trading at a 33-year high. One reason to remain bullish on Japan is because it is an alternative to China exposure with less geopolitical risk. A favorable market structure and improving corporate governance are also positives.
  • The Japanese market currently looks fairly valued based on the historical one-year forward PE ratio of the Nikkei index. However, compared to the U.S., Japan has higher forward EPS growth estimates for the current and next fiscal years, making it attractive.
  • Breadth in Japan continues to be strong, supported by a spike in the number of breakouts. In contrast, breadth is narrow in the U.S. Focus on stocks breaking out of sound bases. Refer to page 9 for a list of such ideas in Japan.
  • 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) bounced off its 200-DMA and retook its 50-DMA. We recommend a patient and selective approach. Despite a pullback in certain indices, markets continue to trade above logical support levels. The most favorable markets continue to be India and Japan. Focus on ideas with rising relative strength and strong technicals in constructive markets.
  • India and Japan are in a Confirmed Uptrend. Hong Kong, South Korea and Taiwan are in an Uptrend Under Pressure. Eight of 13 markets, including Australia and China, are in a Rally Attempt.
  • We shifted Japan to a Confirmed Uptrend from a Rally Attempt after the Nikkei 225 closed at a new 52-week high. We advise investors to gradually allocate capital and increase risk in Japan. Refer to page 12 for a list of stocks breaking out in Japan.
  • Across APAC, the Basic Material, Capital Equipment and Consumer Cyclical sectors have been the best performing sectors over the last 52 weeks. They have been above average in terms of four-week price performance. We saw momentum improve in the Health Care and Utility sectors over the past four weeks.
  • Highlighted Focus List Ideas: Nestle India (NES.IN; NEST IN) and TVS Motors (TVS.IN; TVSL IN).