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 Overview

Posted on by Derek Higa

Key takeaways:

 

  • No clear support in sight for MSCI Asia in the near term.
  • All markets except China in bear market territory. Stay defensive.
  • Sharp decline in stocks above the 200-DMA: Historical precedent suggests that the market will worsen before a turnaround.
  • Staple, Health Care, and Utility stocks leading in near term, while Energy stocks are lagging.
  • APAC Focus List count is near yearly lows of 52 compared with January’s peak of 100. The number of stocks breaking out has also declined drastically in the last few weeks.
  • APAC Focus List removals: A pronounced indicator of inflection points in market cycle
  • We are overweight on China ( 37% of APAC FL ideas by geography ) and Technology ( 31% of APAC FL ideas by sector ).
  • China Case Study: Deviation from global trend.
  • Refer to slide 19 for themes working in China A-shares market.
  • Refer to slide 36 for APAC Focus List Ideas with RS Line reaching new high.
  • Refer to slide 37 and 38 for APAC defensive ideas with beta less than 1 and dividend yield greater than 1.5%.

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 three-year lows and had a strong bounce back from support at ~$54. Refer to pages 3-4 for a weekly and monthly chart.
  • We recommend that investors stay on the sidelines in this volatile environment and preserve their capital. Should there be a need to commit capital, we advise investors to look for defensive ideas. Refer to page 5 for low beta, high dividend yield defensive ideas in the APAC region.
  • All but one market is in a Downtrend. Thailand is in a Rally Attempt. We would like other markets to establish a new low for three days and then look for a FTD.
  • We advise investors to be cautious as FTDs are prone to failure in market recession environments.
  • The highest number of weekly removals occurred last week as we removed 23 ideas from our APAC Focus List.
  • Refer to our APAC Webinar deck for more details about the divergent performance of the China A-share market versus the S&P 500 and themes working in the APAC region.
  • See page 6 for APAC Focus List ideas that have RS Line reaching new high.

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 testing support at October 2019 lows, with the next level at August 2019 lows of ~$62 (-7%).
  • Twelve out of 13 markets are in a Downtrend, with China being the only market in an Uptrend Under Pressure. All markets in a Downtrend could have a follow-through day on Friday except for India, Indonesia, South Korea, and Thailand.
  • China’s CSI 300 is trading constructively above its 200-DMA. It is currently trading 4% below 52-week highs compared with an average of 16% across APAC markets. We are overweight China on our Focus List.
  • Despite the sharp decline in the market over the last few sessions, we have not seen the worst in the number of removals from our Focus List. While our conviction in an imminent market rebound is low, removal capitulation could still signal an inflection point.
  • Currently, 31% of MSCI Asia stocks are trading above their 200-DMA, compared with a five- and 10-year average of 54% and 56%, respectively. During previous sharp declines, the index has worsened further before turning around.
  • Highlighted Focus List idea: Samsung Biologics ( BCS.KR ). Refer to page 6 for an annotated chart.
  • Refer to page 7 for APAC Actionable ideas.

APAC Market Update

Posted on by Derek Higa

Key Points:

 

  • We believe the severity and quickness of markets selling off over the recent weeks is unprecedented compared with recent corrections and could take much longer to bottom out.
  • If this is the case, the probability of several failed follow-through days is high.
  • Hong Kong’s brief follow-through day on March 5 has failed. Twelve of 13 APAC markets are in a Downtrend and no markets are in a Confirmed Uptrend. Only China remains Under Pressure.
  • We recommend raising cash if possible or maintaining a defensive approach across APAC as uncertainty remains high.
  • Among our Focus List ideas in APAC, Hansoh Pharmaceutical  (HANP.HK ), Shandong Weigao ( SDW.HK ), Samsung Biologics ( BCS.KR ), Hindustan Unilever ( HDL.IN ), Asian Paints ( API.IN ), and Pidilite Industries ( PID.IN ) remain resilient.
  • Refer to page 2 of the report for a list of defensive ideas.

APAC Market Update

Posted on by Derek Higa

Key points:

 

  • We are upgrading Hong Kong to a Confirmed Uptrend after the Hang Seng staged a day-four follow-through day (FTD).
  • However, we advise investors to remain cautious, gradually allocating capital as markets strengthen. Global market volatility remains elevated and the Hang Seng remains below its 50-DMA (+3%) and 200-DMA (+1%), which serve as major resistance.
  • Our conviction will rise should the index continue its upside momentum in the near term.
  • We have also shifted the China A-share market back to a Confirmed Uptrend from an Uptrend Under Pressure.
  • After today, Chinese markets are the only APAC markets in a Confirmed Uptrend.
  • Actionable Focus List Ideas include Anhui Conch Cement (ANH.HK), Xinyi Energy (XIE1.HK), and Hansoh Pharmaceuticals (HANP.HK).
  • See our note for additional Hong Kong and Chinese ADR 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 failed to hold above the 200-DMA, but its upside reversal on February 28 was a positive sign in the short term.
  • Six of 13 markets are in a Rally Attempt, five are in a Downtrend, and two are in an Uptrend Under Pressure.
  • The number of stocks above the 50- and 200-DMA has dramatically declined in the past eight weeks after the coronavirus outbreak. Health Care stocks have been holding up well, while Transportation stocks have worsened.
  • Refer to pages 7–10 for annotated charts and key support levels for the Hang Seng, Sensex, Nikkei, and CSI 300.
  • Highlighted Focus List idea: Xinyi Energy (XIE1.HK). Refer to page 12 for annotated chart.
  • Refer to page 13 for APAC stocks with RS line near highs.
  • Refer to page 14 for APAC Actionable Ideas.

APAC Market Update

Posted on by Derek Higa

Key points:

  • We are downgrading India to a Downtrend from an Uptrend Under Pressure as coronavirus fears escalate. We recommend raising cash if possible or maintaining a defensive approach.
  • Including today’s market condition changes, 11 of 13 APAC markets are in a Downtrend.
  • Earlier this week, we shifted Australia, Hong Kong, Japan, South Korea, Singapore, and Taiwan to a Downtrend. Today, we shifted China to an Uptrend Under Pressure from a Confirmed Uptrend as the CSI 300 declined below its 50- and 100-DMA on above average volume.
  • We are bearish on APAC markets. We recommend avoiding buys if possible until a follow-through day occurs.
  • Vulnerable ideas on our list include HDFC Bank ( HFC.IN ) and HDFC ( HDF.IN ). Reduce positions.
  • Ideas with RS near highs include Asian Paints ( API.IN ), Pidilite ( PID.IN ), Dabur ( DAB.IN ), Unilever ( HDL.IN ), and Avenue Supermarts ( AS.IN ). Continue to hold.

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 testing support at the 200-DMA. If this fails, the next level of support is 5% lower. The market condition remains negative overall amid rising coronavirus fears outside China.
  • This week, we downgraded Hong Kong, Japan, and South Korea to a Downtrend following a breach of key moving averages. We also shifted Australia and New Zealand to an Uptrend Under Pressure from a Confirmed Uptrend.
  • Out of 13 markets, seven are in a Downtrend (including the Philippines), five are in an Uptrend Under Pressure, and one (China) is in a Confirmed Uptrend. Average distribution days remain elevated at 6.5.
  • In Japan, Industry Group Rank of Alcoholic Beverages, Leisure Services, Travel Booking, Retail-Auto Parts, Retail-Jewelry, and Steel Producers has declined significantly over the last eight weeks. Refer to page 3 for a list of ideas in these groups.
  • Refer to page 6 for a list of Japanese ideas with beta of less than one that are trading near pivot.
  • Highlighted Focus List idea: Hoya ( HQ@N.JP ). Refer to page 5 for an annotated chart.
  • Refer to page 7 for actionable ideas in APAC.

APAC Market Update

Posted on by Derek Higa

Key points:

 

  • We are downgrading Hong Kong and South Korea to a Downtrend from an Uptrend Under Pressure.
  • We are raising caution about APAC markets amid the increasing number of coronavirus cases outside China. We recommend raising cash if possible or maintaining a defensive approach.
  • Ideas to trim include Samsung SDI ( SCT.KR ), Samsung Electronics ( SGL.KR ), and Zte ( ZTEC.HK ).
  • See the attached note for other ideas to trim as well as those with high Negative Alerts.