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) 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).

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) found support along and bounced off its rising 50-DMA ($69.7). Major markets continue to hold above price support despite a rise in the distribution day count. We recommend a selective approach focusing on constructive ideas with rising relative strength.
  • Six markets, including Hong Kong, Japan and China, are in an Uptrend Under Pressure. Four, including India and Taiwan, are in a Confirmed Uptrend. Two are in a Downtrend, and the Philippines is in a Rally Attempt.
  • India and Taiwan are at new all-time highs and are leading among major APAC markets. In contrast, weaker price action in China and Hong Kong is becoming more concerning. Look for each market to hold above logical support. The Financial sector is leading across APAC markets.
  • Australia is trading 3% off highs and is setting up constructively. Technology and Financial are in the top-right quadrant of the sector rotation graph, indicating outperformance and improvement over four to 26-weeks. Refer to page 15 for a list of leaders (RS Rating > 70) in Australia.
  • Highlighted Focus List Idea: Wisetech Global (WTC.AU; WTC AU).

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) pulled back after testing resistance along the January 2023 high of $73.1. Most major markets have pulled back from recent highs. A sharp break below logical support, along with clustering of distribution days, would be a cautionary signal. Focus on constructive ideas that are trading above key support levels with rising relative strength.
  • Five markets, including China and Taiwan, are in a Confirmed Uptrend. Five markets, including Hong Kong, Japan and India, are in an Uptrend Under Pressure. Since last Thursday, India, South Korea, Japan and Hong Kong were shifted to an Uptrend Under Pressure.
  • India was shifted to an Uptrend Under Pressure after the ruling party in India returned to power with a smaller number of seats than the market anticipated. We are looking for the market to settle and trend in a sideways range in the near term. We recommend a cautious approach.
  • The Nikkei 225 tested its 21-DMA and is consolidating below its 50-DMA. Japanese value stocks are outperforming growth stocks in 2024 and the gap has widened since mid-March. Financials are leading in Japan, along with Energy and Utility. Refer to pages 13 and 14 for stocks of interest in Japan.
  • The Hang Seng has pulled back near its 50-DMA support. Leaders in Hong Kong are holding up well during the recent pullback. Refer to pages 17 for a list of leaders in Hong Kong.
  • Highlighted Focus List Idea: Tencent Holdings (TCNT.HK; 700 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) pulled back after testing resistance along the January 2023 high of $73.1. Most markets are testing key support levels. A sharp break below logical support – with clustering of distribution – would be a cautionary signal. Focus on constructive ideas that are trading above key support levels with rising relative strength.
  • Eight markets, including China, Japan, Hong Kong, India and Taiwan, are in a Confirmed Uptrend. Two are in an Uptrend Under Pressure. Three are in a Rally Attempt.
  • The KOSPI is trading 3% off highs and is close to its 50-DMA (2,700). Look for the index to rise and hold above its 50-DMA to remain constructive. The South Korean government is intensifying its discussions on targeted tax incentives designed to boost the market value of domestic companies. Finalization of these incentives and guidelines could act as a catalyst for the market. Details are expected over the next two months.
  • Breadth remains healthy in South Korea and the number of near-pivot ideas is on the rise. Capital Equipment, Financial and Consumer Staple are in the top-right quadrant of the sector rotation chart. Refer to page 12 for a list of leaders in South Korea.
  • Highlighted Focus List Idea: Cosmax (CSX.KR; 192820 KS).

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 testing resistance along the January 2023 high of $73.1, and is trading at a 52-week high. Most major markets are in a Confirmed Uptrend. Markets continue to trade constructively above key support levels. Focus on constructive ideas with rising relative strength.
  • Seven markets, including China, Japan, Hong Kong and Taiwan, are in a Confirmed Uptrend. Three markets, including India, are in an Uptrend Under Pressure. New Zealand, Indonesia and Thailand are in a Rally Attempt.
  • The O’Neil Methodology emphasizes focusing on leaders in markets with constructive uptrends to generate significant alpha. Focusing on leaders (stocks with an RS Rating above 60) in India would have generated a year-to-date return of 30.8%, outperforming the Sensex 30 return of 2.4%.
  • SMID stocks in India have bounced back from their lows in March and turned constructive. The MSCI India Small Cap Index (SMIN) broke out to a year-to-date high and is above all key moving averages again. Refer to page 8 for an annotated chart of SMIN.
  • The Capital Equipment and Transportation sectors are leading with median 3-month RS Ratings above 80, while Technology is underperforming. Refer to page 11 for a list of stocks in India that are near pivot in early-stage bases, and that are not extended from a historical perspective.
  • Highlighted Focus List Idea: CAMS (CA2.IN; CAMS 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) is trading at a new 52-week high and is attempting to breakout of a multi-year consolidation. We are encouraged by the improving market sentiment and price action in major markets. Focus on constructive ideas with rising relative strength and avoid lagging ideas which are breaking or living below key moving averages.
  • Seven markets, including China, Japan, Hong Kong and Taiwan, are in a Confirmed Uptrend. Four markets, including India, are in an Uptrend Under Pressure. Indonesia and Thailand are in a Rally Attempt.
  • South Korea was shifted to a Confirmed Uptrend after the KOPSI staged a Day-11 follow-through-day. Among the major APAC markets, Hong Kong and South Korea are trading more than 15% below their all-time highs, while other APAC markets are close to all-time highs. Hong Kong and South Korea are most opportunistic markets in our view. Refer to page 8 for an annotated chart of the KOSPI.
  • Breadth in South Korea has improved over the last two weeks. Capital Equipment and Consumer Staple have seen the biggest improvement in breadth over the last four weeks. Leading industry groups within these sectors are Cosmetics/Personal Care in Consumer Staple and Electrical-Power/Equipment in Capital Equipment. Refer to pages 10 and 11 for minicharts of constructive large- and mid-caps among the MSCI Korea constituents. Refer to page 12 for a list of near-pivot ideas.
  • Highlighted Focus List Idea: Samsung Electronics (SGL.KR; 005930 KS).