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 index is facing stiff resistance at the 21-DMA after falling below its 50-DMA (+2%). We recommend that investors remain cautious and continue to sell weak ideas trading below support levels.
  • Eight of 13 markets are in an Uptrend Under Pressure. Australia, Singapore, and Thailand are in a Confirmed Uptrend. New Zealand is in a Rally Attempt, while China is in a Downtrend.
  • Outperforming markets in the short term include India, Malaysia, Singapore, Taiwan, and Thailand. Refer to page 13 for our Index Price Performance Heat Map.
  • We removed 39 Focus List ideas (30% of total) in the last 10 sessions. Given the higher number of removals, we remain cautious. We do not recommend buying stocks near recent lows. Instead, be patient and wait for stocks to form new bases before turning constructive.

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 testing support at the 50-DMA. Be patient and let market volatility settle before increasing risk.
  • Ten markets are in an Uptrend Under Pressure, Australia and Taiwan are in a Confirmed Uptrend, and New Zealand is in a Rally Attempt. The average number of distribution days is elevated at five. If none are added, 20 distribution days will expire across 12 markets in the next five sessions.

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 declined 4% from highs and is testing 21-DMA support. We continue to recommend taking a selective approach. Focus on ideas breaking out of constructive consolidations and continue to trim or avoid ideas historically extended from key moving averages.
  • Australia, Japan, and Taiwan are in a Confirmed Uptrend. We shifted China, India, and Hong Kong to an Uptrend Under Pressure and downgraded New Zealand to a Downtrend.
  • The MSCI Asia Pacific Value index has been outperforming the Growth index since November. Growth has declined over the last few days while Value has held up relatively better. Over a one-year period, value continues to lag growth by a wide margin.
  • We are noticing a rotation out of long-term leading sectors such as Health Care and Technology into Basic Material, Consumer Cyclical, Energy, Financial, and Transportation sectors over the last four weeks.

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 at all-time highs. Focus on ideas breaking out of sound bases and avoid chasing extended stocks.
  • We shifted Taiwan and Hong Kong to a Confirmed Uptrend this week, taking the total number of markets in a Confirmed Uptrend to six.
  • Japan’s TSE Mothers Index has had a history of acting as an early indicator for broader market direction. In the past, healthy pullbacks have indicated a continued rally. Refer to pages 4 and 5 for a price comparison chart of the Mothers Index versus the Nikkei 225 and the Nikkei 500.
  • The average number of Japanese stocks breaking out since October 2020 remains above the six-year average for most sectors except Consumer Staple, Health Care, Retail, and Utility. These sectors have also underperformed on a relative basis.

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 broke above $100 for the first time. Overall, broad and individual indices continue to trade positively on mostly light volume. Participation may continue to be light through most of next week due to the Lunar New Year.
  • We shifted Australia, China, and Japan to a Confirmed Uptrend last week. Four markets including India are now in a Confirmed Uptrend and nine are in an Uptrend Under Pressure. The average number of distribution days remains elevated at 5.2.
  • In Japan and South Korea, weaker stocks with low RS Ratings 13 weeks ago have outperformed with better three-month RS Ratings. In Australia, Hong Kong, India, and Taiwan, leaders have outperformed the broader market.
  • Refer to page 6 for leading stocks that have come under pressure and are trading below the 200-DMA.
  • Across the APAC region, Consumer Cyclical and Retail are leading, while Basic Material and Utility are lagging. Refer to page 7 for stocks in outperforming industry groups.
  • Refer to page 8 for stocks trading near pivot in APAC.

Match

Posted on by Derek Higa

Key points from this report:

 

  • Add to MTCH positions as the stock breaks out to a new high after announcing the acquisition of Hyperconnect. The acquisition will expand the company’s TAM, accelerate Asia expansion, and bring video chat expertise into Match’s app collection. The stock is actionable between $160 and $168.
  • After a pre-earnings shakeout, the stock has reclaimed its 50-DMA and has made an all-time high. Look for shares to continue to trend upward along its rising 50-DMA.
  • Good technical ratings: RS Rating of 78 and A/D Rating of B-.

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 found strong support at its 21-DMA after briefly trading below it. If volatility persists, we would prefer it consolidate near its 21-DMA, which would allow moving averages to catch up.
  • Given the rise in volatility, we recommend a patient approach. Allow markets to settle and gradually increase risk in quality ideas finding support or breaking out from sound bases. Continue to reduce risk in ideas trading below logical support levels.
  • Twelve of 13 markets are in an Uptrend Under Pressure. On Thursday and Friday last week, we shifted 11 markets to an Uptrend Under Pressure.
  • Today, we shifted India back to a Confirmed Uptrend as the Sensex quickly recovered to highs and closed above 50,000 for the first time.

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 near all-time highs and extended from its moving averages. First level of support is the 21-DMA (-5%). Continue to selectively increase risk. Avoid or trim extended ideas.
  • Twelve markets are in a Confirmed Uptrend. The average number of distribution days remains at an elevated level, increasing to 4.8 from 4.4 last week. A continued increase in distribution could be a cautionary sign going forward.
  • Hong Kong is the second-best performing market year-to-date aided by the Shanghai–Hong Kong stock connect program. Attractive valuation and increased IPOs have attracted investors in mainland China, which is reflected in increased southbound inflow. The Hang Seng Index has reached April 2019 resistance and could begin to consolidate. If it continues higher, next resistance is at all-time highs or +13% higher.
  • Refer to page 6 for a price performance chart of the Hang Seng China Enterprises and CSI 300 indices and pages 7 and 8 for an annotated chart of the Hang Seng Index and the Hang Seng Composite Index, respectively.
  • Stocks with high RS Ratings are leading the rally, while mid-cap stocks are driving up the Hang Seng Composite index. Energy, Technology, and Health Care are outperforming. Refer to page 4 for a Sector Heat Map.
  • Refer to page 11 for a list of extended Hong Kong ideas to trim.
  • Highlighted Focus List idea: JS Global Lifestyle. Refer to page 10 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 index is trading at all-time highs. Look for immediate support at the 21-DMA (-6%). Continue to selectively increase risk in quality ideas emerging out of sound bases.
  • All markets are in a Confirmed Uptrend. The average number of distribution days is at an elevated level of four.
  • The Nikkei 225’s performance has caught up with the Nikkei 500 over the past three months, mainly led by large-cap stocks. Refer to the charts on pages 4–6 of the price performance of large versus mid versus small caps, Nikkei 225 versus Nikkei 500 versus Mothers, and value versus growth.
  • In Japan, stocks from Energy, Basic Material, and Capital Equipment are leading, while Retail, Utility, and Health Care are lagging. Refer to page 2 for a sector heat map for Japan and a list of stocks in outperforming industry groups.

Netflix

Posted on by Derek Higa

Key points from this report:

 

  • We recommend adding to positions as Netflix breaks out of a stage-two, 28-week consolidation. The stock gapped up intraday following strong Q4 subscriber growth. Netflix’s story is shifting from sub growth to profitability and positive free cash flow.
  • It has an EPS Rank of 89, Composite Rating of 89, and SMR Rating of A. Relative strength is improving.
  • The company beat Q4 subscriber add expectations, driven by additions in the EMEA region. It had record global subscriber additions for 2020.
  • Free cash flow was positive in 2020 due to non-recurring savings, however, management expects FCF to break even in 2021.
  • Operating margins expanded in 2020, and 2021 guidance was revised to 20% from 19%.
  • In FY21 and FY22, consensus expects EPS growth of 50% and 37%, respectively.