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 Market Update

Posted on by Derek Higa

Key Points:

 

  • We upgraded Japan, Hong Kong, and South Korea to a Confirmed Uptrend as they staged a follow-through day. We recommend a gradual approach to increasing risk. Focus on stocks that are forming the right side or breaking out of sound bases with rising relative strength. Continue to trim positions in ideas that are unable to hold above their logical support levels and retake their key moving averages.
  • The Nikkei 225 rose 3.9% on volume higher than the previous session and staged a Day 8 follow-through day. It has retaken its 21- and 200-DMA. Look for the index to hold above its 200-DMA and eventually trend higher to become more constructive. Refer to page 5 for annotated chart of Nikkei 225.
  • The Hang Seng rose 1.9% on volume higher than the prior session and staged a Day 9 follow-through day. The index retook its 21- and 200-DMA (17,122). It is more than 10% off highs. Next resistance along its 50-DMA (17,600), a level it has not traded above since June. Refer to page 6 for an annotated chart of Hang Seng Index.
  • The KOSPI rose 2.0% on higher d/d volume and staged a day-8 follow-through day. It retook its 21-DMA for the first time since mid-July. Yesterday, it cleared above its 200-DMA resistance (2,635), which should act as support going forward. Immediate resistance is along its 100-DMA (2,723). Refer to page 7 for an annotated chart of KOSPI.
  • Refer to page 4 for a list of stocks trading near pivot with rising relative strength across Japan, Hong Kong, Taiwan, and South Korea.

Buy Ferrari RACE.IT; Exclusivity Strategy Continues to Drive Demand

Posted on by Derek Higa

Key Points:

 

  • We reiterate our buy recommendation on Ferrari as the stock is breaking out of a stage-one 20-week flat base and is at an all-time high.
  • The company is on track to achieve its 2026 financial targets. This would be driven by an exclusivity strategy to maintain strong demand for its cars and higher average selling price due to a change in product mix and personalization features. Ferrari is able to maintain demand for its cars through an exclusivity strategy, while other luxury good providers witnessed a decline in demand.
  • It reported strong Q2 2024 results. Shipments grew 3% y/y to 3,484, in-line with estimates. Revenue increased 16% y/y to €1.7B, beating estimates by 6%. Adjusted EPS grew 25% y/y to €2.29, beating estimates by 13%. The company revised its FY24 guidance upward.
  • Good fundamental profile: Strong EPS Rank 92 and SMR Rating of A. Consensus expects EPS to grow in double digits in 2024 and high single digits in 2025.
  • Good technical profile: RS Rating of 88 and Acc/Dist Rating of C. The selling pressure has declined in the last one week and Up/Down Volume ratio improved to 1.

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) bounced off its 200-DMA support and retook its 100-DMA. Major markets are bouncing off lows and could be running into resistance along declining short-term moving averages. Wait for major markets to stage follow-through days before increasing risk. Focus on select ideas from improving industry groups with rising short-term relative strength.
  • Three markets, including Taiwan, are in a Confirmed Uptrend. Three markets, including India, are in an Uptrend Under Pressure. Six markets, including Japan, Hong Kong and South Korea, are in a Rally Attempt. China is in a Downtrend.
  • We shifted Taiwan to a Confirmed Uptrend after the TAIEX staged a day-4 follow-through day. Overall breath in Taiwan continues to remain low at 28%. Technology stocks in Taiwan are bouncing off their lows and face overhead resistance at their 50-DMAs.
  • Japan’s Nikkei 225 bounced off its August 5 selloff and is yet to stage a follow-through day. We need the index to stage a follow-through day and quickly retake its 200-DMA to turn constructive. The Health Care sector continues to hold up well in Japan. Refer to page 11 for minicharts of iShares MSCI Japan ETF (EWJ) constituents that have bounced off lows and retaken key moving averages.
  • India’s Sensex 30 has pulled back after becoming extended from a historical perspective. Health Care and Consumer Staple have outperformed other sectors based on median 3-month RS Rating. Refer to pages 13 and 14 for a list of leaders outside the APAC Focus List that remain constructive with high relative strength, and that are holding up relatively well despite the volatility in markets.
  • Highlighted Focus List Idea: Cipla (CPL.IN; CIPLA 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) 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).