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 Ex Japan index (AAXJ) declined below its 50-DMA and is 7% off highs. We recommend a cautious approach. Wait for major markets to follow through before increasing risk. Continue to reduce extended ideas. Focus on select ideas with rising relative strength that are holding above key moving averages, with improving industry group rank.
  • Six markets, including India and Australia, are in a Confirmed Uptrend. The Philippines is in an Uptrend Under Pressure. Four markets, including Japan and Hong Kong, are in a Rally Attempt. China and Taiwan are in a Downtrend.
  • Technology continues to remain in the top-right quadrant (Outperform/Improve) of the APAC Sector Rotation Graph. Health Care, which has been underperforming over a long period, has improved over the last four weeks. Refer to page.
  • Rotation is occurring among Technology industry groups (IGs). Semi-Conductor and Hardware related IGs are lagging in Taiwan, South Korea, and Japan, while Tech Services is improving in Japan and India due to better-than-expected results, and positive commentary about the revival of IT spending.
  • Based on median 3-month RS Rating, Health Care is leading, followed by Consumer Staple. Within Health Care, Medical-Generic Drugs and Medical-Ethical Drugs have outperformed over the last 13 weeks. Refer to page 9 for a list of leaders in Health Care. These stocks are trading above key moving averages with rising relative strength.
  • Highlighted Focus List Idea: Samsung Biologics (BCS.KR; 207940 KS).

APAC Market Update

Posted on by Derek Higa

Key Points:

 

  • We downgraded Japan, Hong Kong, and South Korea to a Downtrend from an Uptrend Under Pressure. We recommend a cautious approach to adding risk. Trim ideas breaking below moving averages or key support levels. If you must invest, focus on select ideas with rising relative strength, holding above key moving averages, and improving industry group rank. Wait for the indices to establish a new low and eventually stage a follow-through day before turning constructive.
  • The Nikkei 225 declined 3.3% and declined below June lows of 37,950. Next major support is along its rising 200-DMA (36,662) should May lows of 37,617 fail. It has pulled back 11% since its all-time high on July 11. Refer to page 4 for an annotated chart of Nikkei 225.
  • Yesterday, the Hang Seng declined 0.9% and made a lower low. Today the index breached its 200-DMA and became vulnerable to further downside. Next support is at its April 2024 low of 16,044. Refer to page 5 for annotated chart of Hang Seng Index.
  • The KOSPI breached its 100-DMA support for the first time since May. It is 6% off highs with next major support along its rising 200-DMA (2,618). Refer to page 6 for an annotated chart of KOSPI.
  • After today’s status change, seven markets, including India and Australia, are in a Confirmed Uptrend. Taiwan is in an Uptrend Under Pressure. Four markets, including Japan and Hong Kong, are in a Downtrend. Thailand is in a Rally Attempt.

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 (AAXJ) is pulling back from a new 52-week high after breaking out earlier this month. Most major markets, except China and Hong Kong, continue to trade constructively and close to highs. Trim ideas that are extended from a historical perspective. Consider rotating into select ideas with rising relative strength, earlier stage or constructive bases and improving Industry Group (IG) Rank.
  • Ten markets, including Japan and India, are in a Confirmed Uptrend. Hong Kong was shifted to an Uptrend Under Pressure. China and Thailand are in a Rally Attempt. Australia was shifted to a Confirmed Uptrend.
  • Hong Kong’s July 2000 – April 2003 Downtrend is most similar to the current market trend. The Hang Seng index should quickly retake its 50-DMA for the rally to remain constructive, and increase the probability of a bear market bottom. The rally will become more vulnerable to failure if the 200-DMA does not hold.
  • Despite a follow-through day last Friday, breadth across Hong Kong remains narrow. Large-cap Technology stocks are holding up better with many off their recent lows, but we need to see more participation. Refer to page 10 for a list of stocks near pivot in Hong Kong.
  • Australia was shifted to a Confirmed Uptrend after it made a new all-time high. Technology, Financial and Retail are the leading sectors based on median 3-month RS Rating. Basic Material is lagging except for precious metals-related IGs. Refer to page 14 for a list of stocks of interest in Australia.
  • Highlighted Focus List Idea: Xero (XRO.AU; XRO AU).

APAC Market Update

Posted on by Derek Higa

Key points:

 

  • We upgraded Hong Kong to a Confirmed Uptrend from a Rally Attempt after the Hang Seng Index staged a day 4 follow-through day. We recommend gradually increasing risk in the Hong Kong market. Look for a follow-through day in China and the Hang Seng to rise above its 50-DMA for an increased conviction on a sustainable rally. Refer page 2 for a list of near-pivot ideas in Hong Kong.
  • The index gained 2.6% on volume higher than the prior session and closed above its 21-DMA resistance (17,944) for the first time since mid-June. Next resistance is along its 50-DMA (18,344). Refer page 3 for an annotated chart of the Hang Seng Index.
  • Technology has outperformed over the last one to eight weeks. Mega caps in Technology are forming the right side of their respective bases. FL-idea Tencent Holdings (TCNT.HK; 700 HK) is trading 1% below its pivot of HKD 400.2.
  • After today’s status change, nine of the 13 markets, including Japan and Hong Kong, are in a Confirmed Uptrend. Two markets are in an Uptrend Under Pressure. China and Thailand are in a Rally Attempt and in a position for a follow-through day.

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 (AAXJ) broke out to a new 52-week high. Most major markets except China and Hong Kong continue to trend higher and are close to highs. We continue to recommend trimming ideas which are historically extended from long-term moving averages. Consider rotating into select ideas with rising relative strength, earlier-stage or constructive bases and improving Industry Group (IG) Rank.
  • Six markets, including Japan, India and Taiwan, are in a Confirmed Uptrend. Three markets, including Australia, are in an Uptrend Under Pressure. Two markets are in a Rally Attempt. China and Hong Kong are in a Downtrend. Wait for a follow-through day for Chinese markets to turn constructive.
  • Across APAC ex China, Technology is the most extended sector in terms of price percentage performance vs the 50 DMA, followed by Capital Equipment. This is driven by semiconductor- and hardware-related IGs. Avoid chasing extended ideas within Technology and focus on less extended setups. Refer to page 9 for a list of buyable Technology stocks.
  • Technology in Taiwan is extended from a historical perspective. Among the remaining major APAC markets, Technology in South Korea and Hong Kong offer better risk / reward in our view. The sector is improving in these markets and stocks are less extended.
  • For buyable ideas outside Technology, refer to page 13 for a list of near-pivot stocks
  • Highlighted Focus List Idea: Cowell E Holdings (CEHI.HK; 1415 HK).

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 (AAXJ) is trading 1% below its May high and has support along its rising 21-DMA. Most major markets, except China and Hong Kong, continue to trade constructively and close to highs. We recommend trimming positions in leading ideas which are now trading significantly above their historical moving averages. Consider rotating into ideas with rising relative strength from improving Industry Groups (IGs).
  • Six markets, including Japan, India and Taiwan, are in a Confirmed Uptrend. Three markets are in an Uptrend Under Pressure. Three markets, including China, are in a Rally Attempt. Hong Kong is in a Downtrend.
  • Japan was shifted back to a Confirmed Uptrend from an Uptrend Under Pressure after the TOPIX cleared its March highs and made a multi-decade high. An inflation rate above 2% and further weakness in the Yen could still prompt the Bank of Japan to hike interest rates.
  • Value, large-cap and export-oriented stocks are leading in Japan. Insurance and banks IGs in Financial and hardware- and semi-conductor related IGs in Technology continue to gain in terms of IG Rank. Refer to page 12 for a list of leading constituents that are trading close to pivot in the MSCI Japan ETF (EWJ).
  • Highlighted Focus List Idea: Konami (KONA.JP; 9766 JP).

Hong Kong Downgraded to Downtrend

Posted on by Derek Higa

We are downgrading Hong Kong to a Downtrend from an Uptrend Under Pressure. The Hang Seng was down 2.06% on higher d/d volume and added its
11th distribution day. It also undercut its recent low of ~17,750 and made a new month-to-date low. The index is 13% off highs and has decisively breached its
50-DMA support (18,151). The 50-DMA could act as resistance in the near term. Next major support is along its rising 100-DMA (17,308), followed by its 200-DMA
(17,169). See the annotated chart of the Hang Seng on page 3.

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 (AAXJ) is trading 2% off highs with immediate support along its rising 21-DMA. Major markets, except China, continue to hold above logical support or are near new highs. We recommend trimming positions in leading ideas which are now trading significantly above their historical moving averages. Consider rotating into ideas with rising relative strength from improving Industry Groups.
  • Four markets, including India and Taiwan, are in a Confirmed Uptrend. Five markets, including Hong Kong and Japan, are in an Uptrend Under Pressure. China is in a Downtrend and three markets are in a Rally Attempt.
  • Chinese markets remain under pressure due to disappointing economic data and an unchanged benchmark interest rate. Institutional inflows have not risen enough to support the Hang Seng to rally higher. However, some leaders in Hong Kong are still holding up well relative to the index. Refer to pages 11 and 12 for minicharts of leaders that are holding above key moving averages.
  • Emerging markets remain favorable despite a pullback in Tech stocks, especially in South Korea and Taiwan. Focus on ideas that are being rotated into, with rising relative strength, early-stage or constructive bases and improving Industry Group Rank. Refer to page 14 for a list of leaders from strong and improving sectors in India, Taiwan and South Korea.
  • Highlighted Focus List Idea: Torrent Pharmaceuticals (TRR.IN; TRP IN).

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 (AAXJ) retook its 21-DMA ($71.5) and is trading 1% below the May high of $73.6. Major markets continue to hold above logical support or are breaking out to new highs. We recommend trimming or reducing positions in leading ideas which are now trading significantly above their moving averages on a historical basis. Maintain a selective approach and avoid lagging ideas.
  • Five markets, including India and Taiwan, are in a Confirmed Uptrend. Five markets, including Hong Kong, Japan and China, are in an Uptrend Under Pressure. Three markets are in a Downtrend. South Korea was shifted to a Confirmed Uptrend.
  • Emerging markets’ returns and U.S. bond yields are negatively correlated, and U.S. bond yield declines since mid-April have led to a rally in the MSCI Emerging Market Asia index (EEMA). We expect emerging markets to see significant inflows if the Fed starts cutting interest rates.
  • Taiwan is trading 24% above its 200-DMA and is extended from a historical perspective. Technology leaders in Taiwan have accelerated over the last eight weeks and are even more extended above their 200-DMA. Refer to page 13 for minicharts of the most extended Technology names in Taiwan.
  • In India, the Consumer Cyclical sector is improving and outperforming in the sector rotation graph, while Consumer Staple, which was the laggard, is starting to improve. In South Korea, Consumer Staple and Financial are the leading sectors. Refer to pages 18 and 19 for stocks of interest from India, Taiwan (that are not extended) and South Korea.
  • Highlighted Focus List Idea: Apr (AP2.KR; 278470 KS).