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.

 

  • This week, we shifted China and Hong Kong to a Confirmed Uptrend from an Uptrend Under Pressure. With these changes, all 13 APAC markets are in a Confirmed Uptrend. We recommend that investors continue to commit capital to stocks breaking out from sound bases.
  • We expect consolidation in the near term as >90% of stocks are trading above their 50-DMA. To remain constructive, we are looking for leaders to hold their key moving averages if the markets pull back.
  • The MSCI Asia Pacific Large Cap Index has continued to outperform the mid- and small-cap indices. Improvement in the performance of mid- and small-cap indices compared with large cap would indicate increased risk appetite among investors.
  • Technology underperformed relative to Capital Equipment and Consumer Cyclical over the last eight weeks. However, semiconductor stocks within the sector have continued to outperform. Refer to page 8 for stocks near pivot in the sector.
  • Highlighted Focus List idea: Advantest (AB@N.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 is currently trading above all key moving averages. We recommend that investors continue to commit capital to stocks breaking out from sound bases.
  • Eleven out of 13 markets are in a Confirmed Uptrend, while China and Hong Kong are in an Uptrend Under Pressure. China, Japan, New Zealand, South Korea, and Taiwan are trading above their 200-DMA, while the remaining markets are trading between 200-DMA resistance and 50-DMA support.
  • The U.S. Dollar index breached 200-DMA support and is trading near two-month lows as the global economies started to ease restrictions. Emerging markets in APAC posted strong performance over last few sessions. The MSCI Emerging Markets index has recovered 30% from March lows and is retesting resistance at its 200-DMA. Refer to page 7 and 8 for an annotated chart of the U.S. Dollar and EEM indices.
  • South Korea rallied above the 200-DMA, driven by a third stimulus which increased the total stimulus to 14% of GDP. Taiwan has retaken its 200-DMA despite U.S./China trade tensions. Refer to page 9 for an annotated chart of the KOSPI.
  • Highlighted Focus List Idea: MediaTek (MDT.TW)

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

  • The MSCI Asia continues to consolidate above its 50-DMA. Allocate capital gradually in fundamentally sound companies breaking above key resistance levels.
  • Last Friday, we shifted China and Hong Kong to an Uptrend Under Pressure. Refer to page 5 for an annotated chart of the Hang Seng.
  • Japan markets continue to rally on the government’s fresh stimulus. Refer to page 6 for an annotated chart of the Nikkei.
  • In Japan, we see improving momentum in lagging sectors like Consumer Cyclical and Capital Equipment over the past four weeks. We consider broadening strength across weak sectors as a positive for the market rally.
  • Japanese Retail and Technology outperformed over the past four weeks and 52 weeks. Refer to page 7 for a list of stocks near pivot in stage-one bases in these sectors.
  • Highlighted Focus List idea: Keyence ( KEYE.JP ). Refer to page 4 for an annotated chart.
  • Refer to page 8 for actionable ideas on our Focus List.

Social Media

Posted on by Derek Higa

Key points from this report:

 

  • After Q1 results we find it difficult to change our cautious view on Social Media despite stocks recovering.
  • Overall, the overhang and risk for digital advertising is a prolonged recession given historically high correlation between ad spend and GDP growth. With digital ads comprising more than 50% of total ad spend, we believe spend can decline much faster in certain instances.
  • WON Ratings and Rankings have improved with Snap (SNAP) recovering the most off lows and leading with a 90 RS Rating. Facebook (FB) is next at 86 followed by Alphabet (GOOGL) at 85. Given the high risk, we remain neutral at best for all three, however, SNAP is the most appealing in our view should shares break out.
  • We are more negative on the price action for Twitter (TWTR) and Pinterest (PINS). We recommend avoiding both as they continue to struggle to trade beyond resistance levels.
  • See our comments on each company’s Datagraph™ in the full report.

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 held above its 50-DMA. Volume has been below average throughout the rally. We continue to wait for strength to broaden.
  • Overall, with distribution low and price action mostly constructive, we remain positive on APAC markets. Near term, we recommend staying selective in allocating capital and being disciplined about low risk entry points. Markets have risen significantly off lows and are due for a healthy pullback.
  • Out of 13 APAC markets, nine are trading above 50-DMA support. China and Taiwan are leading, trading near their 200-DMA after breaking above their 50-DMA. India is lagging, still below its 50-DMA.
  • The number of liquid stocks trading above the 200-DMA has stabilized over the trailing four weeks. Outside of narrow leadership, the majority are in consolidation. We expect the number to rise again should markets pivot. This change is highlighted in the LHS chart and on page 3.
  • Over recent weeks, Technology stocks have displayed strong momentum. Refer to page 9 for Technology stocks near pivot.
  • Highlighted Focus List ideas: Tencent Holdings (TCNT.HK) and Appen (APX.AU). Annotated charts on pages 7 and 8.
  • Refer to page 10 for Actionable Focus List ideas.

Kakao

Posted on by Derek Higa

Key points from this report:

 

  • The stock is trading at a multi-year high after breaking out from a stage-one 10-week cup base. It has immediate support at the pivot of the base at KRW 192K (-7%) followed by its 21-DMA (-18%).
  • EPS Rank of 22 and SMR Rating of D are expected to improve in the coming quarters. Consensus estimates EPS growth of 194% and 38% for FY20 and FY21, respectively.
  • Good technical ratings: RS Rating of 94 and A/D Rating of A-.
  • Institutional ownership was 733 (47% y/y) in March.

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