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).
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.
Japan Downgraded to a Downtrend
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
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
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
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 21-DMA resistance and is currently testing its 200-DMA. We
recommend a cautious and selective approach to increasing risk.
• Japan and Taiwan are in a Confirmed Uptrend. Five of 13 markets, including Hong Kong, China and Australia, are in an Uptrend
Under Pressure. Six markets, including India, are in a Rally Attempt.
• Japan was shifted to a Confirmed Uptrend from an Uptrend Under Pressure after the Nikkei closed at new highs for the year.
Year-to-date, the Nikkei index has outperformed the S&P 500 and the AAXJ despite a 4.6% increase in the USD to JPY exchange
rate. Over the last year, value has outperformed growth. Notably, the spread between the value and growth indexes has
remained mostly range bound between April 2022 and January 2023. However, the delta in value outperformance is now
increasing since January.
• We are noticing an improvement in breadth across Japanese sectors. The number of weekly stock breakouts has increased
significantly over the last few weeks, which is an encouraging sign. The Basic Material, Capital Equipment and Consumer
Cyclical sectors have led in Japan over the last four to eight weeks. Refer to page 11 for a list of stocks trading near pivot in
Japan.
• Highlighted Focus List Idea: Rohto Pharmaceutical (XP@N.JP; 4527 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 breached its 200-DMA. We recommend a cautious approach to increasing risk. Look for indices to
clear recent overhead supply before resumption of an uptrend. Focus on ideas with rising RS and trading above support levels.
• Taiwan is in a Confirmed Uptrend. Seven of 13 markets, including Hong Kong, China, Japan and Australia, are in an Uptrend Under
Pressure. Three markets, including India, are in a Rally Attempt. The Philippines and Malaysia are in a Downtrend.
• The Hang Seng has pulled back to its 200-DMA. We would look for the index to retake its 50-DMA to turn constructive. We believe
a breach of the 200-DMA would be a negative signal for the market direction longer term. Refer to pages 7 to 10 for annotated
weekly charts of the Hang Seng that compare current index performance with historical instances where the index became
extended. These instances could shed light on what to look for in the coming weeks.
• Year-to-date, there has been a sharp decline in the number of Hong Kong stocks forming bases, along with a significant increase
in the number of failed bases. Both are causes for concern. We would look for a quick improvement in the number of stocks
forming bases for our view on the market to turn more constructive. Look for leaders to hold their respective 50-DMA support.
Refer to page 11 for mini charts of stocks that are holding up well despite current market weakness.
• Highlighted Focus List Idea: HSBC (HSBC.HK; 5 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) breached its 50-DMA support. We recommend a cautious approach to increasing risk.
We are looking for indices to settle, consolidate and find support. A quick retaking of key moving averages would be viewed
as a significant positive. Continue to trim ideas failing to hold support and reduce extended ideas.
• South Korea and Taiwan are in a Confirmed Uptrend. Seven of 13 markets, including Hong Kong, China, Japan and Australia,
are in an Uptrend Under Pressure. Three markets, including India, are in a Rally Attempt. The Philippines is in a Downtrend.
• Breadth across Hong Kong is narrowing with a decline in the number of stocks trading above their 50-DMA. Retail has pulled
back the hardest over the last four weeks. Refer to page 7 for mini charts of weakening large cap stocks.
• The Basic Material and Capital Equipment sectors are under accumulation in major APAC markets. Additionally, the RS lines
of many stocks in the Basic Material and Capital Equipment sectors are at a new 52-week high. Refer to pages 8 to 11 for
mini charts of stocks near pivot.
• Highlighted Focus List Idea: Nippon Paint (NPPT.JP; 4612 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 consolidating above its 50-DMA support. We recommend a selective approach to
increasing risk. Focus on quality ideas with high relative strength as they break out of sound bases.
• Four of 13 markets, including Japan, Australia and Taiwan, are in a Confirmed Uptrend. Five markets, including Hong Kong
and China, are in an Uptrend Under Pressure. Four markets, including South Korea and India, are in a Rally Attempt.
• We have seen improvement in momentum across the Technology sector over the past four weeks. It is leading based on
the 3-month RS Rating and average A/D Rating. The median trailing PE Ratio of liquid Technology stocks is currently near
the low of 2022. Despite the earnings slowdown, the forward PE ratio based on 2023 consensus EPS estimates has reverted
to the pre-COVID level.
• Within the Technology sector, the Electronic Parts and Semiconductor industry groups are outperforming. Look for leading
stocks to hold above their 50-DMA should a pullback occur. Refer to page 12 for a list of Technology stocks trading near
the pivot of their base.
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 recent high and breached its 21-DMA. Next support is at the 50-DMA. We recommend a selective approach to increasing risk. Major markets are extended. However, market conditions remain tilted to bullish with major markets trading constructively above key moving averages. Focus on quality ideas with high relative strength as they break out of sound bases.
- Six of 13 markets, including Japan, Australia, China and Taiwan, are in a Confirmed Uptrend. Three markets, including Hong Kong, are in an Uptrend Under Pressure. Four markets, including South Korea and India, are in a Rally Attempt.
- The Hang Seng is in consolidation mode and we shifted the market condition to an Uptrend Under Pressure this week. In the last two weeks, the index has declined 6% from its recent high, giving up 11% of the rally gains since its November bottom. Look for the index to hold above its 50-DMA. We will turn more cautious if the 50-DMA fails.
- The number of liquid stocks trading above their 200-DMA remains high. However, there has been a decline in the number of stocks trading above their 50-DMAs. Despite the pull back, most stocks are still under accumulation, which is a positive.
- Thus far, the Technology, Health Care and Consumer Cyclical sectors have held up relatively better in the recent rally. On the flip side, the Retail sector is pulling back the most sharply. Refer to page 10 for a list of stocks holding up well.
- Highlighted Focus List Idea: XD (XD.HK; 2400 HK). Refer to page 7 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) pulled back to its 21-DMA and remains constructive. Thus far, most indices continue to
trade above logical support and remain constructive. India is the only weak outlier. We recommend a gradual and selective
approach to increasing risk. Focus on quality ideas with high relative strength as they break out of sound bases.
• Eight of 13 markets, including Hong Kong, Japan, Australia, China and Taiwan, are in a Confirmed Uptrend. New Zealand is in
an Uptrend Under Pressure. Four markets, including South Korea and India, are in a Rally Attempt.
• In India, the average number of breakouts is at a 52-week low. We want to see a spike in breakouts to turn constructive. Refer
to page 10 for list of stocks holding up well in India.
• The government of India announced a $550B union budget today for FY24 (ending March 2024), which is growth of 8% from the
revised budget estimates for FY23. The Capital Equipment, Financial, Consumer Cyclical and Consumer Staple sectors are the
key beneficiaries of the budget. Refer to pages 4-6 for highlights for different sectors.
• Highlighted Focus List Idea: Mahindra & Mahindra (MAM.IN; MM IN).
