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 is range-bound. Look for the 21-DMA to act as support to remain constructive. Continue to allocate capital selectively, favoring fundamentally sound companies from leading sectors as they break out of bases.
  • Twelve markets are in a Confirmed Uptrend. Indices are trading 3% above the 10-WMA on average.
  • Given the recent holidays, Hong Kong, India, and Taiwan were among the few major markets open through Wednesday. On pages 2 and 3, we highlighted sector heat maps for these markets. Refer to pages 6 and 7 for stocks near pivot.
  • Highlighted Focus List idea: Biocon (BBB.IN). Annotated chart on page 5.
  • Refer to page 8 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.

 

  • Through Wednesday, the MSCI Asia is trending higher and is now testing resistance near October 2019 lows. A decisive break above this resistance would be a positive signal for investors. Twelve markets are in a Confirmed Uptrend. Distribution is still low across APAC.
  • The Nikkei has immediate resistance at the 50-DMA, with support at the 21-DMA. Look for key levels in the annotated Nikkei chart on page 5. Technology, Health Care, and Consumer Staple are outperforming. See ideas near pivot from these sectors on page 9.
  • In APAC, liquid stocks trading above the 50- and 200-DMA are steadily increasing from March lows.
  • In the last eight weeks, stocks with high RS Ratings have led gains, while both leaders and laggards have performed well in the past five trading sessions, indicating broadening strength.
  • Large caps are trading closer to their 200-DMA than mid- and small caps.
  • Highlighted Focus List idea: GMO Payments (GMOP.JP). See an annotated chart on page 8.
  • Refer to page 10 for APAC actionable 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 has established resistance at its 50-DMA. We expect the index to trade sideways near its 50-DMA, or August 2019 lows. It must hold above 21-DMA support. We recommend that investors remain selective while increasing risk.
  • Malaysia, New Zealand, South Korea, and Taiwan have pulled back after hitting resistance at the 50-DMA. APAC markets are trading 1% below the 10-WMA, on average, compared with 2% below last week.
  • Capital Equipment, Consumer Cyclical, Energy, and Financial sectors are underperforming and are in the bottom left quadrant in the APAC Sector Rotation Graph on page 3.
  • Refer to page 7 for vulnerable ideas in APAC that are testing 10-WMA resistance from these sectors.
  • Refer to page 4 for Datagraphs of ideas that have hit 10-WMA resistance and are less than 5-8% below their 10-WMA.
  • Highlighted vulnerable idea: Lotte Shopping (LTE.KR)

OTT: Stay-at-Home Accelerates Secular Streaming Story

Posted on by Derek Higa

Key points from this report:

 

  • Stay-at-home measures have boosted global data usage 40% y/y since the second half of March, compared with high-teens growth in January and February.
  • Netflix interest worldwide reached an all-time high the last week of March. We expect subscriber growth to accelerate due to COVID-19 control measures. The company is reporting on April 21. Shares are extended from an entry point. Wait for consolidation to buy.
  • Disney+ reached 50M subscribers globally. Despite quicker-than-anticipated progress with Disney+ subs, theme park closures remain a headwind in the near term. Disney shares are facing immediate resistance and need time to base.  
  • Peacock and HBO Max launch on schedule despite pandemic. The Olympics postponement is a slight setback for Peacock. HBO Max must also delay plans. CMCSA is currently on our Focus List. We recommend holding positions. We are neutral on T.
  • Roku revised its Q1 revenue guidance due to higher growth in active accounts, a positive read-through for subscription-based OTT. We remain cautious on Roku due to the impact on its advertising revenue. We see the stock finding resistance near the 200-DMA and still at risk of retracing to March lows.
  • Refer to page 5 for additional watch list ideas related to streaming and broadband services.
  • Refer to page 6-8 for Datagraphs

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 August 2019 resistance. The index’s higher lows indicate constructive action.
  • Yesterday, we shifted Australia and Japan to a Confirmed Uptrend from a Rally Attempt and an Uptrend Under Pressure, respectively. Refer to page 6 for ideas in these regions that are trading near pivot.
  • All APAC markets are back in a Confirmed Uptrend with an average of one distribution day and trading an average of 2% below the 10-WMA.
  • Consumer Staple is the second-best performing sector after Health Care. Refer to page 7 for top-rated ideas in the Consumer Staple sector.
  • Highlighted Focus List idea: Dabur (DAB.IN). Refer to page 5 for an annotated chart.
  • Refer to page 8 for APAC actionable 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.

 

  • Ten out of 13 markets are in a Confirmed Uptrend, Japan is an Uptrend Under Pressure, and Australia and New Zealand are in a Rally Attempt.
  • We recommend staying conservative in allocating capital, gradually increasing risk as markets strengthen and stocks break out or retrace to prior support levels.
  • Currently, Health Care is the only sector that is trading in the upper right quadrant of our Sector Rotation graph. The upper right quadrant indicates relative outperformance over the last 26 weeks and increasing momentum in the last four weeks.
  • Refer to page 6 for the rotation chart highlighting Health Care’s performance over the last few months. Refer to page 7 for a list of Health Care ideas.
  • Stocks with RS Rating above 80 eight weeks ago have outperformed in the last five sessions. We would like to see stocks with higher RS Ratings eight weeks ago break above key resistance along their 200-DMA, or previous support levels, to raise our conviction in a sustainable rally.
  • Refer to page 8 for actionable APAC ideas.
  • Highlighted Focus List Idea: Samsung Biologics (BCS.KR)

Will the Impact on Ad Spending Be Worse Than 2008-2009

Posted on by Derek Higa

Key points from this report:

 

  • Ad spend is directly correlated with GDP growth and has declined in a worsening trend in the last three instances when U.S. GDP declined ( 1991, 2008, and 2009 ).
  • Digital ad spend accounted for 50% of total ad spend in 2019, up from 14% in 2008.
  • Advertising companies, especially traditional channels such as OOH, radio, and print, will be affected the most due to slowing economic activity. We expect digital advertising to also be affected due to high exposure to small and medium-sized businesses.
  • Companies are suspending 2020 guidance amid the uncertainty. Advertising companies like WPP are suspending dividends and share buyback programs to preserve liquidity.
  • During 2008–2009, GOOGL shares corrected 67% from November 2007 highs to November 2008 lows, compared with 30% from February 2020 highs to March 2020 lows. Advertising companies’ shares declined 67% during the financial crisis but are trading an average of 43% from 52-week highs currently.
  • Among advertising stocks, we are still seeing deteriorating O’Neil Ratings and Rankings. In general, the current decline occurred at a much quicker pace, however the absolute decline during the 2008 financial crisis was more severe.
  • Technical ratings and rankings continue to be poor for TWTR, FB, YELP, WPP.GB, IPG, and OMC. Remain conservative.
  • Refer to page 8 for the ratings and rankings of other internet and advertising 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.

 

  • Despite the majority of APAC markets being in a Confirmed Uptrend, we remain cautious as 12 of 13 markets are still trading below their 21-DMA. Many markets have rebounded after becoming oversold in the short term, however they remain in bear territory.
  • Nine of 13 APAC markets are in a Confirmed Uptrend, two are in an Uptrend Under Pressure, and two are in a Rally Attempt.
  • Over the last 20 years, during normal corrections, MSCI Asia stocks reach a consolidation period before rallying again after bottoming. Only in extreme cases, such as the Great Recession, do the number of stocks trading above the 200-DMA worsen after an initial recovery.
  • China’s CSI 300 has outperformed in APAC markets, however the majority of U.S.-traded Chinese ADRs have declined significantly. Refer to page 4 for outlying Chinese ADRs that are still screening well.
  • Refer to page 6 for actionable Focus List ideas.
  • Highlighted Focus List idea: ZTO Express (ZTO)

APAC Market Update

Posted on by Derek Higa

Key points:

  • We are upgrading Hong Kong, India, Indonesia, and Singapore to a Confirmed Uptrend from a Rally Attempt.
  • Overall, APAC markets have rebounded after becoming oversold in the short term, however they remain in bear territory. We advise investors to remain cautious. Gradually allocate or incrementally add capital as markets rise above key resistance levels. For the majority of indices, the first key level is the 21-DMA.
  • Defensive sectors such as Health Care and Consumer Staple, and Retail (such as drug stores, supermarkets, convenience stores) continue to outperform.
  • After today’s status changes, 10 out of 13 APAC markets are in a Confirmed Uptrend, Thailand is in an Uptrend Under Pressure, and Australia and New Zealand are in a Rally Attempt.
  • Hong Kong Focus List ideas to consider buying include Shandong Weigao Group ( SDW.HK ), Wuxi Apptec ( WUXA.HK ), Wuxi Biologics ( WXBO.HK ), gaming stock Tencent ( TCNT.HK ), and cement manufacturer Anhui Conch Cement ( ANH.HK ).
  • Actionable India Focus List stocks displaying strength include consumer goods manufacturer Hindustan Unilever ( HDL.IN ) and retail store operator Avenue Supermarts ( AS.IN ). These stocks are trading above key moving average support levels with RS lines reaching new highs.
  • Chemical stocks Asian Paints ( API.IN ) and Pidilite Industries ( PID.IN ) and FMCG producer Dabur ( DAB.IN ) are testing resistance at the 200-DMA. Continue to hold.
  • For more ideas see page 2-3.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Over the last two days China, Japan, South Korea, Taiwan, Malaysia, and the Philippines have recorded follow-through days and have been upgraded to a Confirmed Uptrend.

Despite positive action recently, we advise investors to remain cautious as markets remain below key resistance levels. We recommend beginning to allocate capital gradually as markets strengthen.

Defensive ideas from Health Care, Consumer Staple, and Retail are still leading in the short term. Refer to page 6 for a list of defensive ideas (beta <1) trading above their 200-DMA. Outlying growth ideas in Technology are also outperforming. Refer to page 7 for a list of growth ideas that are holding up well.

In the last five trailing sessions, laggards have led gains. As leaders continue to underperform, we remain cautious despite follow-through days seen across APAC markets.

Highlighted Focus List Idea: Aspeed Technology (ASP.TW). Refer to page 8 for Focus List ideas with relative strength near highs.