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.
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 is consolidating with support at its previous highs. Investors should remain cautious. Focus capital on ideas with rising RS until distribution subsides and stock breakouts increase.
  • Japan is the only market in a Confirmed Uptrend. Eight markets are in an Uptrend Under Pressure, Thailand is in a Downtrend, while Hong Kong, Singapore, and Indonesia are in a Rally Attempt.
  • Japanese breakouts are broadening. The number of stocks breaking out in Japan is at a three-year high, led by the Technology and Capital Equipment sectors. Small- and mid-cap breakouts have also improved m/m in September.

APAC Market Update

Posted on by Derek Higa

We are downgrading Hong Kong and Indonesia to a Downtrend from an Uptrend Under Pressure. Overall, we are seeing a clustering of distribution across APAC, with a majority of markets shifted to an Uptrend Under Pressure last week. We recommend a cautious approach to buying growth stocks due to a rise in distribution days and weak price action.

Hong Kong’s Hang Seng index declined 1.8% and breached its support level at June lows of ~23,700 on above average volume and registered its sixth distribution day. We see immediate support at May lows of ~22,500 (-3%), followed by March lows of ~21,100 (-9%). The index is now 20% off highs and is in bear market territory.

See our note for ideas holding up well and weakening technically. Ideas include: Tencent ( TCNT.HK ), Alibaba ( ALGH.HK ), Meituan Dianping ( MEDI.HK ), Li Ning ( LNIN.HK ), Xinyi Energy ( XIE1.HK ), Ausnutria Dairy ( AUST.HK ), Enn Energy ( XINA.HK ), and others.

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 its 50-DMA. We recommend a cautious approach to buying growth ideas amid a clustering of distribution days.
  • Japan is in a Confirmed Uptrend, 10 markets are in an Uptrend Under Pressure, and Singapore and Thailand are in a Downtrend. The average number of distribution days is elevated at 5.3. Refer to page 7 for key support levels.

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 (AAXJ) bounced back above its 21-DMA after testing 50-DMA support the last week. Volume has remained low in the past five sessions compared with the previous declining week.
  • We recommend a cautious approach to growth stocks due to increased volatility and distribution days over the last two weeks. Look for the AAXJ to hold above the 21-DMA in the next few sessions as this week’s price action has not been supported by convincing volume.

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 its 50-DMA. We recommend taking a cautious approach and not chasing extended ideas. Reduce risk in ideas trading below key moving averages or logical support levels.
  • Seven of 13 markets are in a Confirmed Uptrend, while six are in an Uptrend Under Pressure. The average number of distribution days remains elevated.
  • Rotation into Consumer Cyclical stocks has occurred in the medium term. See Sector Rotation Graph on page 7.
  • Several leading stocks have begun to exhibit technical weakness. See pages 8 and 9 for a list of leading stocks that have violated our technical criteria.
  • Focus List removals remain low, but weakness is broadening. Among 12 ideas we removed since July, six are from the semiconductor industry. Currently, Health Care and Retail stocks represent a majority of our Focus List stocks under pressure. See pages 10 and 11 for Focus List ideas that are holding up well and others that are displaying weak price action.
  • Highlighted Focus List idea: LG Household & Healthcare (LHH.KR). Annotated chart on page 6.

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 is trading near 52-week highs and has gained 49% from March lows. It is 6% below an all-time high made in January 2018. We recommend that investors avoid chasing extended ideas and increase risk selectively in stocks with good fundamentals breaking out from sound bases.
  • Eight of 13 markets are in a Confirmed Uptrend. The average distribution day count is elevated at 5.2, compared with 4.8 last week. Price action is constructive despite a rise in distribution.

Digital Advertising

Posted on by Derek Higa

Key points from this report:

 

  • Revised estimates for U.S. ad spend suggest a worse decline than anticipated, however it is expected to be more resilient than past recessions. This is aided by digital and political advertising as well as expectations of a quick rebound in 2021.
  • Digital advertising is expected to be among the least impacted channels. We believe this will be the result of an accelerated shift to online during the recession. By 2024, digital ads will account for 57% of total ad spend, up from 52% in 2020.
  • In Q2, engagement continued to surge across all social media platforms, but ad revenue decelerated.
  • Focus List constituent Facebook (FB) decelerated the least among peers. We believe the stock is an incremental buy along its 21-DMA.
  • Connected TV (CTV) has significant penetration potential. TV has the lowest digital ad penetration among traditional channels.
  • CTV is growing strongly with viewership accelerating during the pandemic. In Q2, global CTV views accelerated 160%, the highest growth among viewing mediums including mobile and PC.
  • We believe our bullish case remains intact for Focus List idea The Trade Desk (TTD). Look to add to positions on a pullback to the 50-DMA.
  • We have shifted more positive on internet stocks. These stocks have rebounded sharply and are trading 8% and 26% above their 50- and 200-DMA, respectively, on average.
  • Traditional advertising stocks are still recovering from the pandemic. They are trading 3% below the 200-DMA on average.
  • See our tables on pages 8-9 for O’Neil Ratings and Rankings and comments.

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 is edging higher to new 52-week highs.
  • We shifted Japan to a Confirmed Uptrend last week. Nine of 13 markets are in a Confirmed Uptrend. The average number of distribution days remains elevated at 4.5.
  • Our Focus List count is near 52-week highs, led by stocks in Health Care and Technology. Refer to pages 7-8 for charts showing Focus List stocks by sector and geography.
  • The number of stocks breaking out in Japan is increasing and is approaching January highs. However, price performance has yet to broaden significantly.
  • In Japan, Technology, Health Care, and Retail have remained long-term leaders and have also outperformed in the last four weeks.
  • Highlighted Focus List Idea: Nintendo ( NNDO.JP ). See page 6 for annotated chart.
  • Refer to page 9 for stocks near pivot in Japan with a Composite Rating greater than 80 and trading above the 21-DMA.
  • Refer to page 10 for Actionable Focus List ideas.

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 remains bullish. Continue to allocate capital selectively. Look to buy quality ideas breaking out of earlier-stage bases above key moving averages.
  • Eight of 13 markets are in a Confirmed Uptrend. The average number of distribution days remain elevated at 4.7.
  • Basic Material, Consumer Cyclical, and Energy are outperforming in the last four weeks.
  • Strength is broadening as low RS ideas have improved in the past few days, while high RS ideas have underperformed.
  • See page 9 for stocks trading near pivot and in early-stage bases.
  • Highlighted Focus List ideas: Li Ning (LNIN.HK) and Tencent Holdings (TCNT.HK). Refer to pages 5 and 8 for annotated Datagraphs, respectively.
  • See page 10 for actionable ideas on our Focus List.

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 broken out of a monthlong sideways consolidation and is now trading at 52-week highs. Continue to selectively buy leading ideas with strong relative strength as they break out of sound bases.
  • Eight markets remain in a Confirmed Uptrend. The average number of distribution days remains stubbornly high despite expiration. It has risen to 4.3 from 4.2 last week.
  • The number of stocks breaking out has rebounded from March lows, mainly led by stocks in emerging markets. Breakouts are generally broadening across sectors, however, the best price performance since March lows has been concentrated in Health Care, Technology, and Basic Material. Refer to page 6 for stocks near pivot.
  • Highlighted Focus List idea: Workman (WORK.JP).
  • Refer to page 7 for actionable Focus List ideas.