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 Weekly

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 breached its 200-DMA on heavy volume and is testing support at that level. We recommend taking a more cautious approach and trimming laggards that have failed to hold above logical support levels and extended ideas trading well above key moving averages.
  • Yesterday, we shifted Japan back to a Downtrend from a Rally Attempt. Four of 13 markets are in a Confirmed Uptrend, four are in an Uptrend Under Pressure, four are in a Rally Attempt, while one is in a Downtrend.
  • Technical similarities of the MSCI Asia ex. Japan index (AAXJ) to those of 2018 are raising cautionary signals today. In 2018, the index consolidated with lower highs near its 40-WMA after a major run in 2017. It then corrected significantly. Refer to page 6 for annotated chart of the AAXJ index.

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.

 

  • Five markets, including India, South Korea, and Taiwan, are in a Confirmed Uptrend. Three are in an Uptrend Under Pressure, including China. Five markets, including Japan and Hong Kong, are in a Rally Attempt.
  • Japan’s Nikkei 225 index has been trading in a downward channel since February. It bounced off its 200-DMA on low volume and is currently testing resistance along its 50-DMA. Hong Kong’s Hang Seng index has been consolidating since February. It bounced off its recent lows on below average volume and is clinging to its 200-DMA.
  • In APAC, leadership remains unclear between value and growth. The trend is similar in Japan, however, both indices have been more volatile. In Hong Kong, the MSCI Growth index remains the clear leader with a wide performance gap from the Value index over the past year.

APAC Market Update

Posted on by Derek Higa

Key points from this report:

 

  • We are downgrading Hong Kong to a Downtrend from an Uptrend Under Pressure. The Hang Seng was down 2.9% on above average volume and registered its eighth distribution day. The index has declined for the eighth consecutive session and breached its 200-DMA for the first time since November 2020.
  • We recommend a cautious and selective approach while trading stocks in Hong Kong. The Hang Seng must first establish and hold a new low for three days before a follow-through day can occur.
  • Mega-cap names have lagged and are trading below their key moving averages.
  • Over the past four to eight weeks, Consumer Staple, Financial, Retail, and Technology have lagged. However, recently the index is being dragged down by Technology stocks in particular.
  • On the flip side, we continue to notice areas of strength outside of Technology where ideas are holding above key support levels. Some industry groups that have showcased strength include Retail/Wholesale – Automobile, Retail – Apparel/Shoes, and Apparel – Shoes & Rel Mfg. Refer to page 6 for notable names holding up well from leading industry groups.
  • Focus List ideas holding up well near pivot of their recent base include L’Occitane International (LOIS.HK; 973 HK), Sunac Services (SUSH.HK; 1516 HK), and Prada (PRAD.HK; 1913 HK). Refer to page 4 for minicharts of stocks in Hong Kong that are holding up well.

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.

 

  • Five markets, including India, South Korea, and Taiwan, are in a Confirmed Uptrend. Four are in an Uptrend Under Pressure, including China and Hong Kong. Japan, Indonesia, and New Zealand are in a Rally Attempt, while Malaysia is in a Downtrend.
  • The TAIEX, KOSPI, and Sensex are trading near 52-week highs. Leadership in Taiwan and South Korea is concentrated in fewer stocks. Bellwether names like TSMC (TSM.TW) and Samsung Electronics (SGL.KR) are lagging, trading more than 10% below 52-week highs.
  • In India, 64% of stocks are trading within 10% from their 52-week high. The number of breakouts is significantly above the five- and 10-year averages. However, this is mostly led by less liquid stocks. Refer to pages 11–12 for mini charts of ideas with the best technical setup in Taiwan, Korea, and India (FL ideas highlighted).

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 is testing resistance at the 100-DMA after breaking above the downward channel in May. We recommend that investors focus on quality ideas that have formed sound bases, are trading above their key moving averages, and are at proper entry points.
  • India, South Korea, and Taiwan are the top-performing markets, while China, Japan, and Hong Kong are trading in a range-bound fashion. Shipping stocks are driving the rally in Taiwan. Internet companies lead in South Korea.
  • Since mid-June, growth stocks are slightly leading the value stocks over the past year. Refer to page 7 for a price performance chart for these indices.
  • Select stocks have improved in Technology, however, a majority are still lagging. RS Rating has declined for 61% of Tech stocks from four and eight weeks ago.
  • Refer to pages 10 and 11 for stocks (market cap >$5B) with improving and declining RS Rating from four and eight weeks ago, respectively.
  • Refer to page 8 for mini charts of mega-cap tech stocks holding up well.
  • Highlighted Idea: Tokyo Electron (RG@N.JP).

Charter Communications

Posted on by Derek Higa

Key points from this report:

 

  • Accumulate CHTR as the stock broke out to an all-time high from a stage-two five-week flat base on above average volume. It is up 33% since we added it to our U.S. Focus List in May 2020.
  • Good technical profile: RS line is edging upward. A/D Rating has turned positive over the past few weeks, indicating accumulation. Good Up/Down Volume ratio of 1.2 denotes money inflow.
  • Charter is the second largest cable and high-speed internet player in the U.S., with more than 29M broadband subscribers, second to Comcast (31M broadband subscribers). Its increasing broadband customer base and improving free cash flows are the key growth drivers. The company’s mobile business is expected to break even on an adjusted EBITDA basis this year.
  • Cable cash flows are improving due to expanding EBITDA margin and lower capex intensity. EBITDA margin expanded 3ppts to ~39% over the past two years due to increased internet penetration and churn improvement.

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 pulled back below the 50- and 100-DMA after briefly gaining above these moving averages for a few sessions. A clear direction has yet to emerge for the index. We continue to recommend a selective approach. Avoid chasing extended ideas.
  • Six markets are in a Confirmed Uptrend, four are in an Uptrend Under Pressure, and three are in a Rally Attempt. Hong Kong was shifted to an Uptrend Under Pressure this week.
  • Markets have remained range-bound for several weeks. Growth sectors such as Technology, Health Care, and Retail have shown signs of recovery in the past two sessions. We will look for this strength to continue to raise our conviction.
  • Vaccinations across major APAC countries accelerated over the last four weeks. One dose of the vaccine has reached ~20% of the population in Australia, Hong Kong, India, Japan, and South Korea. The reopening of economies continues to be an important theme that we will keep an eye on, as it impacts sector performance and rotation.

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.

 

  • Seven markets, including Hong Kong, South Korea, India, and Taiwan, are in a Confirmed Uptrend. Three markets are in an Uptrend Under Pressure. Japan, Indonesia, and New Zealand are in a Rally Attempt. Markets are trading in a range-bound fashion with low distribution. We would look for a definite direction after the Fed meeting today.
  • The MSCI Asia Pacific Growth index and Value index are trading sideways. Thus far, the performance of either index has not signaled an emergence of leadership. We believe a breakout of the Growth index from consolidation would be positive for markets.
  • Among $1B-5B market cap stocks, the median RS Rating has declined across sectors compared with thirteen weeks ago (mid-March). Technology has been an exception to this with a stable RS Rating during this period.

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 is 8% off 52-week highs and is testing support at its 100-DMA after breaking above it recently. The iShares MSCI Emerging Market Asia index is closely tracking the MSCI Asia index. The iShares Core MSCI Pacific is trading near 52-week highs.
  • Eight markets including China, Hong Kong, Korea, and Taiwan are in a Confirmed Uptrend. We recommend increasing risk gradually as markets strengthen, with a focus on quality ideas with rising relative strength and constructive setups.
  • Overall, small-cap stocks are outperforming by a narrow margin in APAC. Among major markets, India, and Hong Kong have seen the widest spread of outperformance from small caps over the trailing year.
  • In India, the spread between small-cap outperformance over large caps is at a historically high level. Therefore, we recommend trimming any extended small-cap ideas in India.

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 broke above its February downward trend line and is trading 6% off highs. We continue to look for indices to rise above resistance this week and recommend a gradual approach to increasing risk as markets strengthen.
  • Major markets, except for Japan, are back in a Confirmed Uptrend. The average number of distribution days declined to 3.2 from 3.6 last week and is below the elevated level of four.
  • We are noticing outperformance in select Financial industry groups such as Finance-Invest Bnk/Bkrs, Finance-Consumer Loans, Insurance-Life, and Financial Svcs-Specialty.
  • Refer to page 6 for Financial charts with timely technical setups and page 7 for a list of Financial stocks with good O’Neil metrics.
  • Highlighted Focus List idea: China Merchants Bank (CMBC.HK). Refer to page 4 for an annotated chart.