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) found support near the August/September lows of $83 (-2%) and retraced back to its 21-DMA, which is acting as resistance. We recommend a cautious and patient approach awaiting market confirmation given the volatility. Wait for indices to hold above prior lows and clear above logical resistance levels to become constructive.
  • Four markets, including India, are in a Confirmed Uptrend. Three are in an Uptrend Under Pressure, including Australia and China. Five markets are in Rally Attempt, including Japan, Taiwan, and Hong Kong. South Korea is in Downtrend.
  • Over the past year, India has outperformed all other major APAC markets as well as the S&P 500. The SENSEX has gained more than 100% since the follow-through day on March 31, 2020. Several positive events have favored the market’s rally.
  • In India, institutional investors account for about 70% of the free float. Institutional stock purchases were significant during early 2021, but this has tapered off in the recent six to eight months. We believe the lack of institutional participation during the recent market acceleration is a cautionary signal for a pullback or consolidation period to occur in the near term.
  • Indian stocks are extended. Half of the liquid stocks in India are trading 20% or more above their 200-DMA. This is significantly higher compared with other major APAC markets. Refer to page 10 for mini charts of extended stocks. If mandated to buy, we recommend that clients focus on select stocks breaking out of early-stage bases with strong accumulation. Refer to page 11 for ideas.
  • Highlighted Focus List idea: Trim IRCTC (IR1.IN; IRCTC 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) has declined below its key moving averages and is testing support along August/September lows of $83. It is still trading 9% below its 200-DMA and 18% below February 2020’s high of $102.4. We continue to recommend a cautious approach as broad price action remains weak.
  • Three markets, including India, are in a Confirmed Uptrend. Three are in an Uptrend Under Pressure, including Australia and China. Three markets are in a Rally Attempt. Japan, Hong Kong, Taiwan, and South Korea are in a Downtrend.
  • Oil prices are near multi-year highs. The current price increase is driven by an unexpected global V-shaped recovery, leading to demand exceeding supply in a short period. Consensus expects supply to catch up later this year. Historically, oil prices and the MSCI Asia Pacific index largely move in tandem. However, there are short periods (six to nine months) where they have deviated.
  • The Energy sector is the clear outperformer over the past eight weeks. This is mainly attributable to coal producers and oil and gas exploration companies. Refer to page 8 for mini-charts of ideas trading near pivot from the Energy sector.
  • Highlighted Focus List idea: Tata Power (TTP.IN; TPWR:IN).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this report:

 

  • We are downgrading Japan to a Downtrend from an Uptrend Under Pressure. We recommend a cautious and defensive approach. Refer to page 3 for stocks with defensive characteristics.
  • Today, the Nikkei 225 was down 2.2% on above average volume and registered its fourth distribution day. It is trading more than 10% below its 52-week high and has declined below its 50- and 200-DMA. The next logical level of support is 26,954 (August lows; -2%). Refer to page 2 for an annotated chart of the Nikkei 225.
  • Notable large-cap ideas that are under pressure and have pulled back from their recent 52-week highs include Toyota Motor (TYMO.JP; 7203 JP), Sony (SO@N.JP; 6758 JP), KDDI (DDIC.JP; 9433 JP), Softbank Corp (SOF1.JP; 9434 JP), Nippon Telg & Tel (NTT.JP; 9432 JP), Denso (DE@N.JP; 6902 JP), and Z Holdings Corp (YHOO.JP; 4689 JP). Murata Manufacturing (SM@N.JP; 6981 JP) and Shin-Etsu Chemical (UC@N.JP; 4063 JP) have declined below their 50- and 200-DMA.
  • The Health Care and Technology sectors are weakening. Energy has outperformed over the recent four-week period. Select stocks related to the reopening theme continue to hold up well. Refer to page 4 for a list of stocks that have remained resilient.
  • After today’s status change, three out of 13 APAC markets are in a Confirmed Uptrend. Three are in an Uptrend Under Pressure, including Australia and China. Five markets, including Hong Kong and Taiwan, are in a Rally Attempt. Japan and South Korea are in a Downtrend.

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 has immediate resistance along its declining 50-DMA ($87.7). It is still trading 8% below its 200-DMA and 17% below February 2020’s high of $102.4. We continue to recommend a cautious approach as market conditions remain mixed. Be patient in underperforming Chinese markets.
  • India and Thailand are in a Confirmed Uptrend. Six are in an Uptrend Under Pressure, including Japan, Australia, South Korea, and China. Five markets, including Hong Kong and Taiwan, are in a Rally Attempt.
  • Today, we shifted Japan to an Uptrend Under Pressure from a Confirmed Uptrend. Value and cyclical stocks from the Capital Equipment, Consumer Cyclical, and Financial sectors are outperforming over the past 1–4 weeks. Refer to page 7 for a list of stocks near pivot in Japan.
  • Since 2015, the Japanese market rally has been driven by growth stocks as opposed to the dominance of value stocks between 2000 and 2010. Like other markets in APAC, Japanese growth and value stocks move largely in tandem.
  • Furthermore, when a correction occurred, Japanese value stocks outperformed growth on a relative basis. Refer to pages 3 and 4 for value and growth analysis for Japan.
  • Highlighted Focus List idea: NOF Corporation (NOFC.JP; 4403 JP)

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 index is trading below the 200-DMA. We recommend a cautious approach given the recent market volatility.
  • Three markets, including Japan and India, are in a Confirmed Uptrend. Five are in an Uptrend Under Pressure, including Australia, China, and South Korea. Three markets are in a Rally Attempt, while Hong Kong and Singapore are in a Downtrend.
  • Across the region, weekly stock breakouts continue to remain higher in leading markets. Breakouts remain below the three-year average in China, Hong Kong, South Korea, and Taiwan.

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 living below its 200-DMA ($93.4; +4%). It is testing resistance trading below its 50-DMA ($88.8). We continue to recommend a selective approach. Allocate risk in select markets, focusing on constructive ideas with rising relative strength.
  • Five markets, including Japan, Australia, and India, are in a Confirmed Uptrend. Four are in an Uptrend Under Pressure, including South Korea and China. Four markets, including Hong Kong and Taiwan, are in a Rally Attempt.
  • Hong Kong’s Hang Seng is in a Rally Attempt and remains weak and vulnerable. It could be at another inflection point after facing resistance along its 50-DMA (26,366; +3%). Refer to page 7 for an annotated chart of the Hang Seng.
  • Technology and casino stocks are under heavy pressure again due to regulatory fears, but more concerning is China Evergrande’s liquidity crisis.
  • Over the past few weeks, Hong Kong stocks have come under pressure again after rising from lows. However, there are pockets of strength among the Basic Material, Capital Equipment, Energy, and Utility sectors.
  • Refer to page 8 for ideas with rising RS in Hong Kong and page 9 for timely short ideas.
  • Highlighted idea: Hong Kong Exchanges & Clearing (HKEX.HK; 0388 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 cleared above 50-DMA ($89.4; -1%) resistance. It is still trading 2% below its 200-DMA ($96.3). We recommend a selective approach. Allocate risk in select markets, focusing on constructive ideas with rising relative strength.
  • Six markets, including Japan, Australia, South Korea, and India, are in a Confirmed Uptrend. Three are in an Uptrend Under Pressure, including China. Four markets, including Hong Kong and Taiwan, are in a Rally Attempt.
  • Both the MSCI Japan value and growth indices have risen sharply in the near term, depicting broad strength across Japan. Large caps have outperformed mid- and small-cap ideas based on median RS Rating as well as median price performance over the past 13 weeks.
  • We are observing improving momentum among Basic Material, Capital Equipment, Health Care, and Technology stocks in Japan. Refer to page 10 for stocks near pivot from these sectors.
  • Highlighted Focus List idea: Tokyo Electron (RG@N.JP). See 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) has retaken its 21-DMA ($87.20; -2%). It has immediate resistance along its declining 50-DMA ($89.70; +1%). Overall market sentiment is still cautious. A follow-through day in South Korea is encouraging, but we prefer to see strength broaden to other markets before taking a gradual approach in allocating risk.
  • Five markets, including Australia, South Korea, and India, are in a Confirmed Uptrend. Three are in an Uptrend Under Pressure, including China. Five markets, including Hong Kong, Japan, and Taiwan, are in a Rally Attempt.
  • India continues to be an outlier and is trading at a new all-time high. It has gained 95% since the follow-through day in March 2020. We are noticing more participation of liquid stocks in the rally while less liquid stocks have pulled back. However, it is notable that breadth remains low despite the market making a new high. Also, we are observing deviating performance between the index and liquid stocks. A decreasing number of breakouts and an increase in failed breakouts despite a market rally could be a cautionary signal. Overall, we recommend a selective approach given the extended nature of the market.

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 from its recent low (84; -4%) and retraced back to 21-DMA resistance. Next resistance is along its declining 50-DMA ($90.3; +4%). We recommend a cautious and patient approach. Focus on quality ideas with constructive technical setups.
  • Four markets, including Australia and India, are in a Confirmed Uptrend. Three are in an Uptrend Under Pressure, including China. Six markets, including Hong Kong, Japan, South Korea, and Taiwan, are in a Rally Attempt.
  • Weakness has broadened across APAC. Only Basic Material, Capital Equipment, and Utility have gained in the last eight weeks.
  • Moreover, the number of breakouts has declined in recent weeks. The most significant declines are in Taiwan and Korea. The number of breakouts has declined broadly across APAC sectors.
  • Select industry groups, particularly those that are defensive in nature, are outperforming. Refer to pages 7 and 8 for stocks near pivot in leading industry groups.
  • Highlighted Focus List idea: Sysmex (TOAF.JP).