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) broke below September lows and made a new 52-week low. We recommend a cautious approach to adding risk. We have become more skeptical of a meaningful rally beginning in the near term, as more markets fail to hold above recent lows. Keeping to our rules, some markets are still in position for follow-through days.
  • India is in an Uptrend Under Pressure. Seven markets, including China, Hong Kong, and Taiwan, are in a Downtrend. Five markets, including Japan, Australia, and South Korea, are in a Rally Attempt.
  • The MSCI Asia Pacific small cap index has performed better than the large cap index since August. Its year-to-date performance is not materially better than the large cap index.
  • We see improving momentum in the Consumer Staple sector over the past four weeks. Food-related industry groups are leading within the Consumer Staple sector. Refer to page 10 for stocks of interest in the Consumer Staple sector.
  • Highlighted Focus List Idea: Rohto Pharmaceutical (XP@N.JP; 4527 JP). Refer to page 6 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) continues to trade at a 52-week low. Next support could be near March 2020 lows of $53 (-10%). We recommend a cautious approach to adding risk. Markets could stage a counter-trend rally at oversold levels. However, we recommend staying patient and waiting for a follow-through day before allocating risk.
  • India and Indonesia are in an Uptrend Under Pressure. Nine markets, including Japan, China, Hong Kong, South Korea and Taiwan, are in a Downtrend. Singapore and Thailand are in a Rally Attempt.
  • Indonesia and India remain the leading markets across APAC. On a sector basis, breadth remains low. There is notable outperformance in industry groups with reopening themes. Refer to page 7 for stocks of interest from the leading industry groups.
  • Hong Kong and Macau have signaled their reopening intentions with concrete steps over recent weeks. We are seeing the gaming, lodging and travel categories in the leisure segment significantly outperform the broader Hang Seng index.
  • Highlighted Focus List Idea: Samsonite (SAM.HK; 1910 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) has closed down for a sixth consecutive session and is trading at a 52-week low. We recommend a cautious and defensive approach to adding risk. Be patient and look for a follow-through day as an initial signal for a sustainable rally.
  • India and Indonesia are in an Uptrend Under Pressure. Ten markets, including Japan, China, Hong Kong, South Korea and Taiwan, are in a Downtrend. Thailand is in a Rally Attempt.
  • There has been notable improvement in momentum of the Financial, Consumer Cyclical and Retail sectors over the last four weeks.
  • The Financial sector is leading across APAC ex. China except in Hong Kong and Taiwan. Most leading names are from Japan, followed by India, Indonesia and Thailand. Refer to pages 8 and 9 for a list of leading ideas from the sector. Refer to pages 10, 11 and 12 for mini-charts of notable stocks from these markets.
  • Highlighted Focus List Idea: Bajaj Finance (BJF.IN; BAF 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 trading at a 52-week low. We continue to recommend a cautious approach to adding risk. A counter-trend rally could occur in the near term, but we believe it will provide another opportunity to reduce positions. Focus on ideas with defensive characteristics and rising relative strength.
  • India is in a Confirmed Uptrend. Five markets, including Japan and Indonesia, are in an Uptrend Under Pressure. Six markets, including China, Hong Kong, Australia, South Korea and Taiwan, are in a Downtrend. Thailand is in a Rally Attempt.
  • The Consumer Cyclical, Financial and Retail sectors saw improved momentum in the last four weeks. We see strength in Covid-related reopening themes in the Consumer Cyclical and Retail sectors. We have provided a list of leading industry groups and notable names on page 10 and 11. However, the number of stocks near pivot is low across APAC. Look for improvement in stock breakouts before increasing risk.
  • Highlighted Focus List Idea: Samsonite (SAM.HK; 1910 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) faced resistance along its declining 21-DMA and pulled back to its 52-week low. We recommend a patient and cautious approach to adding risk. Look for indices to hold above September lows in the near term.
  • India is in a Confirmed Uptrend. Seven markets, including Japan, Singapore and China, are in an Uptrend Under Pressure. Hong Kong is in a Downtrend. Taiwan, South Korea, Australia and Thailand are in a Rally Attempt.
  • Indonesia has been the best performing APAC market year-to-date with an index gain of 11%, compared with 17% and 21% decline in S&P 500 and AAXJ index, respectively. Refer to stocks of interest list in page 9.
  • As a net exporter, Indonesia’s currency is one of the best performing currencies in the APAC region. Exports have accelerated since 2020, driven by strong crude oil and other commodity prices.
  • The Jakarta SE Composite index (0JAKCOMP) had a very high correlation with the price of crude oil between 1992 and 2008. This correlation has declined since 2008. However, the current correlation is at a decade high driven by a resurgence in oil prices recently. This year, financials have contributed more than energy stocks to index performance. Indonesian banks have historically benefited in a rising interest rate environment.
  • Highlighted Focus List Idea: Bank Central Asia (BCA.ID; BBCA IJ).

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 below May lows of $65.40 and made a new 52-week low. We recommend a cautious approach to adding risk. If possible, raise cash and be more defensive in markets that are in a Downtrend. Refer to page 15 for a list of defensive ideas trading near pivot across APAC.
  • India is in a Confirmed Uptrend. Seven markets, including Japan and China, are in an Uptrend Under Pressure. Thailand is in a Rally Attempt. Hong Kong, Australia, South Korea and Taiwan are in a Downtrend.
  • We downgraded Hong Kong to a Downtrend from an Uptrend Under Pressure as the Hang Seng broke below May lows of 19,179. Key support remains between 18,200 and 18,400. Refer to pages 12 and 13 for a weekly and monthly annotated chart of the Hang Seng. Refer to page 14 for mini charts for technology stocks that have come under regulatory scrutiny.
  • Beware of Catching a Falling Knife: The historical annual trailing PE for the Hang Seng is 7.6x and is currently near 2018 lows. The forward PE for the Hang Seng is approaching six-year lows. It is possible the market could rebound as it did from 2018 lows. However, the current environment is unprecedented given geopolitical tensions, regulatory issues and macroeconomic issues.
  • Highlighted Focus List Idea: Gulf Energy Development (GULF.TH; GULF TB).

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 100-DMA resistance. We recommend a cautious approach as volatility is picking up, accompanied by weak price action. Wait for indices to settle down and find support before reassessing risk.
  • Nine markets, including Japan, India, Taiwan and South Korea, are in a Confirmed Uptrend. Three markets, including Hong Kong and China, are in an Uptrend Under Pressure. Thailand is in a Rally Attempt.
  • India, Japan, and Indonesia are leading based on 3-month price performance and have remained resilient despite volatility. On the flip side, Taiwan and South Korea are vulnerable markets testing key support levels.
  • The Energy, Utility and Basic Material sectors are outperforming over the last four to eight weeks. The Financial, Health Care and Technology sectors have underperformed during this period.
  • Only a few stocks held their gains constructively after rallying from lows amid an increase in volatility. Refer to page 12 for a list of stocks that have held gains after rallying from 52-week lows.
  • Highlighted Focus List Idea: Bank Central Asia (BCA.ID; BBCA:IJ).

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) failed to hold above its 21- and 50-DMA support. We recommend a cautious approach while volatility persists. Wait for indices to settle down and find support before reassessing risk. Continue to focus on quality ideas with rising relative strength and good A/D Ratings.
  • Eight markets, including Japan, India, Taiwan and South Korea, are in a Confirmed Uptrend. Three markets, including Hong Kong and China, are in an Uptrend Under Pressure. Two markets are in a Rally Attempt.
  • MSCI AC Asia Pacific ex Japan growth index has underperformed the value index over the last 52-weeks. The spread between the growth and value indices increased between December 2021 and March 2022. However, the spread has remained constant since then, with both indices declining. We believe the strength in growth stocks in other major markets is not reflected in the growth index in APAC due to high weighting for China and Hong Kong.
  • The average RS Rating of high PE stocks (PE>25) is currently higher than for low PE (PE<25) and high dividend yield (>3%) stocks. Until eight weeks ago, low PE and high dividend yield stocks were outperforming high PE stocks in terms of average RS Rating. There was significant outperformance in the Basic Material and Capital Equipment sectors. Refer to page 8 for stocks of interest with a PE Ratio above 25.
  • Highlighted Focus List Idea: Larsen & Toubro (LST.IN; LT IN).