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

After a strong week, the MSCI Asia ex Japan and major markets are trading mixed through Wednesday. As markets pause, leaders remain constructive.

Rotation into large caps has been especially noticeable recently. See our list of large caps with high A/D Ratings here.

Oil prices have risen to year-to-date highs, but the Energy sector continues to lag on a relative basis over the last 26 weeks. This is noticeable in our Sector Heat Map.

If energy ideas revert to the mean, we anticipate leading energy names will regain momentum.

Energy Absolute ( ENAP.TH; EA: TB ), Petronet ( NET.IN; PLNG: IN ), and highlighted Focus List Idea Reliance ( REL.IN; RIL: IN ) are among the top-rated energy ideas in our Sector Card.

Going forward, we are using this new format for our weekly notes, which will include our Sector Heat Map, Market Conditions, Key Metrics, and Sector Card on an ongoing basis.

See our list of Actionable Focus List Ideas here.

APAC Weekly Summary

Posted on by Derek Higa

The MSCI Asia ex Japan rose to year highs on Wednesday, as did China, Hong Kong, and India. The index has seemingly
changed character this week as it approaches August 2018 highs.
India has risen to all‐time highs, rising above 39,200 intraday before pulling back to the lower end of a three‐day range.
We expect a pause or consolidation near term as the market gets ready for general elections.
A total of 1,170 APAC stocks broke out of bases in March. Approximately 38% were from China A‐share stocks. India had
the most stocks trading near pivot, accounting for 19% of 4,995 stocks in APAC.
In APAC Sector Rotation, Basic Materials are still lagging long term, but have recently displayed the most improvement in
momentum across all sectors in the region. Its RS Rating has also improved.
See Basic Material ideas with Strong Ratings and Rankings here.
See Actionable Ideas on our Focus List here.
Highlighted Focus List Ideas: Asian Paints ( API.IN; APNT: IN ) and Pidilite ( PID.IN; PIDI: IN ).

APAC Weekly Summary

Posted on by Derek Higa

Key Points:
We downgraded Japan and South Korea to an Uptrend Under Pressure. The Nikkei’s action this month
has been been erratic and volatile with two massive drawdowns on March 8 and 25. We see Japan’s late
follow‐through day and sharp declines as reasons for a cautious approach.
APAC distribution has risen to 3.5 days on average (versus 3.2 last week) but we believe the majority of
markets have taken the volatility in stride and are holding above support.
The number of Focus List ideas has steadily risen this year, so we remain optimistic. Should this trend
change, an increase in the number of removals could be a negative sign for market conditions, but this
has yet to happen.
We share our top Focus List picks in APAC, including our thoughts on each Datagraph™ ( IEI.IN, LASE.JP,
REL.IN, NAN.AU, XRO.AU, AGP.HK, HAIN.HK ).
Update on Haidilao ( HAIN.HK; 6862:HK ): look to add to positions on a breakout to all‐time highs.

APAC Weekly Summary

Posted on by Derek Higa

Key Points:

 

  • India is back in a Confirmed Uptrend after briefly testing the 200-DMA. Distribution days have reset to zero as the Sensex has risen to year highs, making those in February irrelevant.
  • The November 2 (2018) follow-through day remains intact. The next stop is likely ~39,000, also were we view next significant resistance.
  • We continue to view India’s April/May elections as a significant catalyst to a sustainable uptrend.
  • Year-to-date performance is improving but the breadth of breakouts are still low.
  • In Sector Rotation, we highlight outperforming sectors Transportation ( VGA.IN ), Retail ( TIT.IN ), and Energy ( REL.IN ). The Financial sector ( HFC.IN, ICG.IN, KOK.IN ) looks most timely, with several India banks recently becoming actionable. Cyclical is still early.
  • Several leaders among large cap ideas. For best-of-breed large-cap ideas, see our list here.
  • For other stocks of interest and actionable ideas in India, see our list here.
  • Highlighted Focus List idea: Kotak Mahindra Bank ( KOK.IN, KMB: IN ) is pivoting.

PVR Cinemas

Posted on by Derek Higa

Key points from the report:

On March 18, the stock broke out of a stage-one nine-week cup base on above average volume and is actionable.

The Company had three- and five-year EPS growth of 22% and 27%, respectively. Its EPS Rank is expected to improve, driven by double-digit EPS growth estimates for FY19 and FY20.

Excellent fundamental ratings: best-in-class Composite Rating of 99, EPS Rank of 90, SMR Rating of B.

Strong technical ratings: RS line is trending upward, RS Rating of 87, A/D Rating of B-.

New Media vs. Old Media

Posted on by Derek Higa

Key points

  • Cord-cutting accelerated in Q4 2018: the top five pay-TV companies lost approximately 822,000 video subscribers, compared with 216,000 lost in Q4 2017.
  • Connective TV ( CTV ) advertising is in its initial growth phase. Ad-supported video via over-the-top ( OTT ) platforms could drive U.S. programmatic TV ad spend to ~$4.7B (~7% of ad spend) in 2020, a 2018–2020 CAGR of 64%.
  • 2019 notables: OTT competition, rising content spend, and password mooching.

APAC Weekly Summary

Posted on by Derek Higa

Key Points:

  • Major APAC markets continue to act constructively but are due for consolidation in the near term in our view.
  • Should this happen, we would look for support to hold above or at key moving averages (200-DMA).
  • To remain constructive, leading ideas (RS Rating > 80) should also hold support while indices pull back.
  • Large caps have largely underperformed over several weeks but this week, we are noticing more rotation into quality large-cap growth ideas globally.
  • RS Ratings for technology stocks have improved the most over the last four weeks.

APAC Weekly Summary

Posted on by Derek Higa

Key Points:

  • The majority of APAC markets are in a Confirmed Uptrend. Taiwan and Malaysia were upgraded last week.
  • China’s markets are leading the year-to-date performance, with A-share markets as clear standouts. The CSI 300 has gained nearly 23% year-to-date but is due for a pause or pullback.
  • Moreover, A-share breakouts have been impressive thus far. The number has risen to multi-year highs.
  • India, on the other hand, has been disappointing. Geopolitical tensions and upcoming elections are pulling focus from the market.
  • Keep an eye on China infrastructure plays.
  • Focus List Idea: China Railway Construction (CRC.CN; 601186: CH) is approaching an entry point.