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) 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).

APAC Weekly Summary

Posted on by Derek Higa

Key points:
• The MSCI Asia Ex Japan index (AAXJ) retook its 21- and 50-DMAs and is attempting to breakout to year-to-date highs. Market
sentiment has improved and we are encouraged by the price action in major markets. We recommend a gradual approach to
increasing risk as markets follow-through or break above key moving averages or resistance levels.
• Seven markets, including China, Japan, Hong Kong and Taiwan, are in a Confirmed Uptrend. Three markets, including India, are in
an Uptrend Under Pressure. South Korea and Thailand are in a Rally Attempt. Indonesia is in a Downtrend.
• The Hang Seng retook its 200-DMA for the first time since August 2023. Going forward, look for the index to hold above its 200-
DMA if tested to remain constructive. Foreign funds have been net buyers of Chinese stocks for three consecutive months since
February.
• Breadth is improving across Hong Kong. The Median RS Rating and Accumulation/Distribution Rating have improved over the past
13 weeks across Hong Kong stocks, particularly large caps. Refer to page 10for minicharts of large caps in Hong Kong to overweight.
• We notice strength broadening across sectors in Hong Kong. Over the past four weeks, Transportation, Financial, Consumer Staple,
Health Care, Consumer Cyclical and Technology have seen significant improvement in median RS Rating. Refer to pages 11 and 12
for a list of leaders in Hong Kong.
• Highlighted Focus List Idea: Tencent (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) bounced off its 200-DMA support and retook its 100-DMA. The index is testing resistance at its 50-DMA. We recommend a patient approach. Markets are bouncing off recent lows. Look for indices to retake key moving averages or follow through to turn constructive. Focus on constructive ideas with rising relative strength.
  • China, Malaysia and Singapore are in a Confirmed Uptrend. Four markets, including India and Hong Kong, are in an Uptrend Under Pressure. Five markets, including Japan and South Korea, are in a Rally Attempt. Taiwan is in a Downtrend.
  • Over the last four weeks, leaders (with an RS Rating >70) from all sectors except Technology had positive returns. Within Technology, semiconductor-related industry groups are pulling back sharply. Thus far, leadership holding above key moving averages during market volatility is a sign of strength in the underlying longer-term bull run.
  • We see strength broadening into weaker sectors in APAC. In addition to Capital Equipment which continues to improve and outperform, we are noticing early signs of improvement in Retail and Consumer Cyclical. Refer to pages 9 and 10 for stocks of interest from the Consumer Cyclical and Retail sectors.
  • Highlighted Focus List Idea: Pop Mart (PMIG.HK; 9992 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) breached its 21- and 50-DMA support for the first time since February. Most APAC markets are under pressure. Clustering of distribution days along with weakening price action are cautionary signals. Markets must now retake or consolidate above logical support levels to turn constructive. If possible, raise cash and adopt a patient approach. Focus on constructive ideas with rising short-term relative strength.
  • China is in a Confirmed Uptrend. Nine markets, including Hong Kong, Taiwan and India, are in an Uptrend Under Pressure. Japan, South Korea and the Philippines are in a Downtrend. Today, we downgraded Japan and South Korea to a Downtrend.
  • Leading stocks with RS ratings above 70 are holding up well despite a pullback, with 70% still above their 50-DMA. Leading stocks should hold above key support levels if tested during a constructive pullback.
  • Across APAC, Capital Equipment is moving to the top-right quadrant of the sector rotation chart, suggesting relative outperformance and improvement over the last four weeks. This is prevalent in Japan, Hong Kong, and India. Refer to pages 17-18 for a list of leading stocks from the Capital Equipment sector.
  • Highlighted Focus List Idea: ABB India (AB.IN; ABB 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) broke above March highs and remains constructive above its rising 21-DMA. Most markets continue to hold above logical support levels. Continue to focus on high- or rising-relative strength ideas which are displaying constructive price action.
  • Seven markets, including India, South Korea, Taiwan and Hong Kong, are in a Confirmed Uptrend. Five markets, including Japan, are in an Uptrend Under Pressure. China is in a Rally Attempt.
  • We shifted Japan to an Uptrend Under Pressure from a Confirmed Uptrend after the Nikkei failed to hold above its 21-DMA. It is still trading 15% above its 40-WMA. A constructive consolidation, as the long-term moving averages catch up, is considered healthy. The spread between MSCI Value and Growth has slightly increased since late March.
  • Capital Equipment, Basic Material and Retail are moving into the top-right quadrant of the sector rotation chart for Japan. We are also seeing slight improvement in Consumer Cyclical and Financial. Technology, which was an outperformer, has pulled back over the past four weeks. Refer to page 10 for a list of stocks of interest in Japan.
  • Highlighted Focus List Idea: Coca-Cola Bottlers Japan (KITK.JP; 2579 JP).