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 its recent January low of $77.9 and made a new 52-week low. We maintain a  cautious view on APAC markets. Wait for further market confirmation (via a follow-through day) before reassessing risk. Look for an increase in breadth or a rise in the number of stock breakouts to turn constructive. 
  • Three markets are in a Confirmed Uptrend. Three markets, including Singapore and Taiwan, are in an Uptrend Under Pressure. Six  markets, including Japan, Australia, India, China, and South Korea, are in a Rally Attempt. Hong Kong is in a Downtrend. 

      • The MSCI Asia Pacific growth index has underperformed the value index over the last 52 weeks, and the outperformance of value                  over growth is near a 52-week high. Longer term outperformance for growth peaked in January 2021, and there has been a steady              decline in the spread since then. The spread is now reverting to pre-pandemic levels.

APAC Market Conditions Worsen Broadly

Posted on by Derek Higa

Key points from this report:

  • The Sensex declined 4.7% today and closed below its 200-DMA on 2X the average volume. It has breached its 200- DMA for the first time since the pandemic-induced decline in 2020. The index also undercut its December 2021 support  (55,133). The next logical support level could be near 53,200 (-2%). Refer to page xx for an annotated chart of Sensex. 
  • We would like the index to establish a new low and hold above this level for at least three days. Following this, we would  look for a follow-through day to shift the market to a Confirmed Uptrend. 
  • We advise investors to take a defensive approach. Avoid or trim positions in ideas that have broken their logical levels of  support on heavy volume. Let market volatility settle before reassessing risk. Monitor ideas holding above their key levels of  support with rising relative strength.

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 after facing resistance along its declining 50-DMA. Markets are reacting to heightened geopolitical tensions, making the short-term trend vulnerable. We continue to maintain a cautious and patient approach. Focus on ideas with rising relative strength in leading industry groups.
  • Five markets, including Singapore, are in a Confirmed Uptrend. Japan, Hong Kong, India, and Taiwan are in an Uptrend Under Pressure. Four markets, including Australia, China, and South Korea, are in a Rally Attempt.
  • Eight of the 12 APAC markets (excluding China) have COVID-19 cases near highs. Among major markets, Australia, India, and Taiwan have significantly fewer cases compared with their recent peaks. Eight of the 12 APAC countries have reached more than 70% vaccination, which is higher than the U.S. (65%).

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) reclaimed its 21-DMA and is currently testing its declining 50-DMA resistance. Continue to avoid weak ideas which are trading below key moving averages. Focus on ideas with rising relative strength.
  • Five markets, including Singapore, are in a Confirmed Uptrend. We shifted Japan to an Uptrend Under Pressure. Hong Kong, India, and Taiwan are also under pressure. Four markets, including Australia, China, and South Korea, are in a Rally Attempt.
  • Oil (Light Sweet Crude) has cleared resistance at ~$85 and is currently testing resistance at ~$93. It faces its next resistance at the psychological level of $100 (+9%). The Oil & Gas Exploration and Production Industry Group continues to outperform within the Energy sector.

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 52-week lows and is testing resistance along its declining 21-DMA. We continue to recommend a cautious and patient approach. Trim positions in former leading ideas which have risen off lows and are testing resistance along their key moving averages.
  • Five markets including Japan are in a Confirmed Uptrend. Four markets including Hong Kong, India, and Taiwan are in an Uptrend Under Pressure. South Korea, Australia, and New Zealand are in a Rally Attempt, while China is in a Downtrend.
  • Indonesia (0JAKCOMP), Singapore (0SNGPORI), Thailand (0BNGKSET), and The Philippines (0PSECOMP) are trading at 52-week highs despite declines in other APAC markets in the last few weeks. China’s stimulus, easing lockdown restrictions, higher weight towards cyclical sectors, and favorable valuations are contributing to outperformance. Refer to page 11 for a list of outperforming ideas from these markets.

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) found support after making a new 52-week low. It has immediate resistance along its declining 21- and 50-DMA (+1%). We maintain a cautious and patient approach. Look for further confirmation across APAC awaiting follow-through days. Several markets will remain closed for most of the week and will need to catch up upon reopening. Continue to focus on ideas with rising relative strength.
  • Four markets including Japan are in a Confirmed Uptrend. Five markets including Hong Kong, India, and Taiwan are in an Uptrend Under Pressure. Australia and New Zealand are in a Rally Attempt, while China and South Korea are in a Downtrend.

APAC Weekly Summary

Posted on by Derek Higa

• The MSCI Asia ex. Japan index (AAXJ) rolled over after facing resistance along its declining 100-DMA. It has breached its 50- and 21-DMA and is trading near a 52-week low. We recommend a patient and cautious approach. Reduce risk in ideas failing to hold above key moving averages or logical support.
• Four markets, including Hong Kong, are in a Confirmed Uptrend. Four markets, including India and Taiwan, are in an Uptrend Under Pressure. China, Australia, South Korea, Japan, and New Zealand are in a Downtrend. Southeast Asian markets, including Thailand, Indonesia, Singapore, and the Philippines, are holding up well on a relative basis.
• Over the past eight weeks, Energy, Financial, Utility, and Basic Material have outperformed based on price performance. On the flip side, Health Care and Retail are underperforming. We recommend that investors focus on ideas which are displaying improving relative strength and are trading on the right side of bases. Refer to 7 and 8 for stocks near pivot from leading sectors. Most ideas included have low betas and a good dividend yields.
• Highlighted Focus List Idea: Emperador ( TSI.PH; EMP PM ). Refer to page 5 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) rolled over after resistance along its declining 100-DMA ($85.6; +3%) and has breached its 50-DMA. We recommend a cautious approach due to increasing distribution and weak price action in major markets.
  • Nine markets, including Hong Kong, India, Australia, and Taiwan, are in a Confirmed Uptrend. China and New Zealand are in an Uptrend Under Pressure. South Korea is in a Rally Attempt and Japan is in a Downtrend.
  • The Energy sector has been leading over the last four to eight weeks. Majority of this outperformance is driven by the Oil & Gas Exploration/Production industry group. Oil & Gas has been outperforming since March 2021, driven by a steady increase in oil prices. Historically, oil price has been positively correlated with inflation. So, we recommend a cautious approach to the sector as Fed expects inflation to cool down this year and oil price faces multiple resistance levels between the current price and $100/barrel. Avoid extended stocks. Refer to page 12 for stocks near pivot from Energy.
  • Light Sweet Crude (0COIL) has broken above 2018 levels (+11%). However, the Global energy sector (IXC) has yet to retake its 2018 levels. The Energy sector in Europe and APAC have led the U.S. This is mostly due to a higher weight of renewable energy stocks within APAC and Europe. We believe Renewable energy will remain a key theme within Energy sector in the long term.

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) reclaimed its 21-DMA and is looking to retake its 50-DMA. We continue to recommend a gradual approach to allocating risk.
  • Nine markets, including Hong Kong, India, Australia, Japan, and Taiwan, are in a Confirmed Uptrend. Three markets, including China, are in an Uptrend Under Pressure. South Korea is in a Rally Attempt. We shifted Hong Kong to a Confirmed Uptrend last week. It had a more assertive follow-through day on Wednesday. The Hang Seng’s price action is encouraging and could be an early signal of a bottom.
  • MSCI Asia Pacific Value index has been outperforming the Growth index over the last one year and the spread has increased over the last few weeks.
  • Financial stocks are under accumulation across APAC. Notably, banks are outperforming in Taiwan, Singapore, and Hong Kong. The outperformance across Financial is in line with rising interest rates; a similar trend witnessed during January 2012 to December 2014 and June 2016 to December 2017 when 10-year bond yield increased. Refer to page 10 for a list of near pivot ideas from the financial sector.
  • Highlighted Focus List Idea: Bajaj Finance (BJF.IN; BAF IN). 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.

 

  • We have become more positive on APAC markets as major markets have been upgraded or shifted back to a Confirmed Uptrend. Seven markets, including India, Australia, Japan, and Taiwan, are in a Confirmed Uptrend. Four markets, including China, are in an Uptrend Under Pressure. South Korea and Hong Kong are in a Rally Attempt.
  • 2021 Recap: India and Taiwan were the best performing markets. China and Hong Kong’s performance was negative and lagged other major markets. Thailand was the best performer among smaller markets. Refer to page 13 for a list of the large-cap constituents of major indices that have outperformed in 2021.