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) pulled back from its 50-DMA resistance and is testing its 200-DMA. We recommend a patient and selective approach. Focus on constructive markets and ideas with rising relative strength.
  • India is in a Confirmed Uptrend. Hong Kong, South Korea and Taiwan are in an Uptrend Under Pressure. Eight of 13 markets, including Japan, Australia and China are in a Rally Attempt. Thailand is in a Downtrend.
  • Japan is trading close to a 52-week high. We have seen breadth improve and a spike in the number of breakouts. Foreign equity investment net flows on a 12-months rolling cumulative basis have largely been positive since February. Refer to page 15 for a list of near pivot stocks in Japan.
  • The Hang Seng is trading between its 50- and 200-DMA. Breadth has remained the same over the past four weeks. Look for a rise in breakouts to turn more constructive. The current action in the Hang Seng index is similar to the set ups in 1998 and 2002. The index quickly retaking its 50-DMA is bullish price action to look for. Additionally, a quick breach of the 200-DMA would be considered a major bearish signal.
  • Highlighted Focus List Ideas: Nippon Telegraph and Telephone Corporation (NTT.JP; 9432 JP) and Samsonite International (SAM.HK; 1910 HK). Refer to pages 8 and 9 for their respective annotated charts.

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 its 50- and 200-DMA. Next support is near March lows of ~$63. We recommend a patient and selective approach. Reduce lagging ideas. Focus on ideas which are trading constructively with rising relative strength.
  • India is in a Confirmed Uptrend. Hong Kong, South Korea and Taiwan are in an Uptrend Under Pressure. Nine of 13 markets, including Japan, Australia and China, are in a Rally Attempt.
  • In 2023, The Philippines, India, China and Indonesia will be the fastest growing economies in APAC with GDP growth estimates above 5%. In 2022, the CPI was above central bank targets across markets in APAC. Only five of 13 markets are expected to keep inflation within target ranges in 2023. Interest rates were unchanged in eight of 13 APAC markets at their recent respective policy meetings.
  • Among major markets, India is expected to have strong growth in APAC with projected growth of 5.9% in 2023. India is also expected to bring down inflation to within the target range this year. The Sensex has held up relatively well in the last two weeks.
  • In India, over the past four-to-eight weeks, we saw improvement across the Basic Material, Energy, Health Care and Financial sectors. Technology continues to lag. Refer to pages 12 and 13 for minicharts of constructive large-cap ideas in India.
  • Highlighted Focus List Idea: ICICI Bank (ICG.IN; ICICIBC 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 consolidating above its 50- and 100-DMA support. It has been trading in a tight range over the last four weeks. We recommend a patient and selective approach. Look for further broadening of strength across markets to turn more positive.
  • Nine markets are in a Rally Attempt and four are in a Confirmed Uptrend. The number of weekly stock breakouts in APAC ex China remains below the three-year average. We are looking for a sustained increase in breakouts above the three-year average to increase our conviction.
  • Technology was the best performing sector over the last two months. The sector has now taken a pause. There is short-term rotation into other sectors. The Basic Material, Capital Equipment and Consumer Cyclical sectors have been outperforming over the last four to eight weeks. The Capital Equipment sector has entered the top right quadrant of the Rotation Graph. Refer to page 10 for stocks trading near pivot in these sectors.
  • Highlighted Focus List Idea: Zijin Mining Group (FZM.HK; 2899 HK). Refer to page 8 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) is trading slightly above its 50- and 100-DMA. We continue to recommend a patient and selective approach. Major indices are trading constructively as we look for breadth to improve.
  • Hong Kong, South Korea, Taiwan and India are in a Confirmed Uptrend. Nine of 13 markets, including Japan, Australia and China, are in a Rally Attempt.
  • We shifted South Korea to a Confirmed Uptrend on Monday the KOSPI gained above the recent rally high. We have seen breadth improve over the past 13 weeks. Breakouts are currently in an uptrend, which we believe is a positive sign. We see outperformance among technology-related stocks. Refer to page 9 for mini charts of large-cap stocks trading constructively. The mini charts on pages 10 and 11 are for stocks trading near pivot.
  • Highlighted Focus List Idea: LG Energy Solution (LE1.KR; 373220 KS).

APAC Weekly Summary

Posted on by Derek Higa

Key points:
• The MSCI Asia ex. Japan index (AAXJ) is testing resistance along March highs of $68. We recommend a patient and selective approach.
Continue looking for confirmation through follow-through days before reassessing risk. Improvement in breadth will provide conviction
in a sustainable rally.
• Hong Kong, Taiwan and India are in a Confirmed Uptrend. Ten of 13 markets, including Japan and China, are in a Rally Attempt.
• The number of stocks trading above their 200-DMA has improved in Taiwan and Japan. Despite a follow-through day in Hong Kong
and in India, we are yet to see breadth improve. Look for an increase in the number of stocks trading above their key moving averages.
• The number of stocks breaking out in Japan and Taiwan are above their one- and three-year averages. Trends in Hong Kong are
improving. Breakouts in India are at a one-year low despite a follow-through day. We would look for an increase in breakouts to raise
conviction in a sustainable rally. A quick rise in breakouts would be a positive signal for markets. Refer to page 10 for a list of stocks
that are breaking out.
• Highlighted Focus List Idea: Galaxy Entertainment (PIPE.HK; 27 HK).

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- and 200-DMA. We recommend a patient and selective approach. Look for confirmation through follow-through days before reassessing risk.
  • We shifted Hong Kong to a Confirmed Uptrend from an Uptrend Under Pressure after the Hang Seng staged a day-7 follow-through day. We will look for the index to retake its 50-DMA to raise conviction in a sustained rally. We recommend investors take a gradual approach to increasing risk. Refer to page 17 for a list of near-pivot stocks in Hong Kong.
  • In the first three months of 2023, the MSCI APAC growth index has outperformed the value index. Stocks with a PE > 25 have been under higher accumulation compared to low-PE stocks. Currently, the median price performance of liquid stocks in APAC ex China is near one standard deviation below the average. There has been swings on either side over the last year.
  • The Capital Equipment sector has been improving over the past four weeks. It is approaching the top-right quadrant (outperforming/improving) of the APAC rotation graph. Stocks in the Machinery-Mtl Hdlg/Autmn industry group are outperforming. Refer to page 18 for a list of outperforming ideas in the Capital Equipment sector.
  • Highlighted Focus List idea: Wisetech Global (WTC.AU; WTC AU).

APAC Weekly Summary

Posted on by Derek Higa

Key points:
• The MSCI Asia ex. Japan index (AAXJ) is testing its 200-DMA resistance. We continue to recommend a cautious approach
to adding risk. Look for follow-through days to occur before reassessing risk. Continue to focus on ideas with rising relative
strength that are trading constructively.
• Taiwan is in an Uptrend Under Pressure. Seven of 13 markets, including South Korea and India, are in a Rally Attempt.
Five markets, including Japan, Hong Kong and China, are in a Downtrend.
• Among major APAC markets, Taiwan has remained resilient. The majority of Taiwan’s outperformance can be attributed
to the Technology sector. The Elec-Semiconductor Mfg industry group is a notable outlier.
• Technology is the leading sector across APAC. It is in the top right quadrant (Outperforming/Improving) of the APAC
rotation graph. High PE (>25) technology stocks have outperformed year-to-date. Elec-Semiconductor Equip, ElecSemiconductor Mfg and Electronic-Parts are the leading industry groups. Refer to page 10 for a list of near-pivot stocks in
the Technology sector.
• Highlighted Focus List Idea: Accton Technology (ACC.TW; 2345 TT).

Japan Downgraded to a Downtrend

Posted on by Derek Higa

We Downgraded Japan to a Downtrend from an Uptrend Under Pressure as the Nikkei 225 and TOPIX declined below their 200-DMA. The indices have traded in a sideways choppy range for more than a year. The policy meeting under the new BoJ leadership could be a catalyst.

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 its 100- and 200-DMA support. We recommend a cautious approach to
adding risk. Look for indices to settle and stage a follow-through day before allocating risk. If you must allocate capital,
focus on ideas with rising relative strength.
• Japan and Taiwan are in an Uptrend Under Pressure. Indonesia is in a Rally Attempt. Ten of 13 markets, including Hong
Kong, China, India and South Korea, are in a Downtrend.
• Across APAC over the last four weeks, a higher number of industry groups from the Capital Equipment and Technology
sectors have seen improvement in their Group Rank. On the flip side, it has deteriorated for most groups in the Consumer
Cyclical, Financial and Retail sectors.
• Refer to page 4 for a list of leading industry groups. Refer to page 11 for a list of stocks near pivot from these groups.
• Highlighted Focus List Idea: Orion (OIN.KR; 271560 KS)

APAC Market Update

Posted on by Derek Higa

Key Points:

  • We downgraded Hong Kong to a Downtrend from an Uptrend Under Pressure as the Hang Seng index declined 3% on above average volume and breached its 200- and 100-DMA support. See the annotated chart of Hang Seng on page 3.
  • We downgraded Australia to a Downtrend from an Uptrend Under Pressure as the ASX All Ordinary index declined 2.2% on above average volume and breached its 100-DMA support. See the annotated chart of the ASX All Ordinary index on page 4.
  • We recommend a cautious and defensive approach. The indices must first establish and hold a new low for three days before a follow-through day occurs. A follow-through day can occur on Thursday next week (March 16) at the earliest.
  • After today’s status change, the market conditions are as follows:
    • Confirmed Uptrend (2): Japan and Taiwan
    • Uptrend Under Pressure (2): South Korea and New Zealand
    • Rally Attempt (3): India, Indonesia, and the Philippines
    • Downtrend (6): Hong Kong, Australia, China, Singapore, Malaysia, and Thailand