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.
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
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
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
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).
APAC Weekly Summary
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
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
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
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
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
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).
