APAC Weekly Summary

Posted on March 20, 2019March 27, 2019 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.

APAC Weekly Summary

Posted on July 18, 2018February 1, 2019 by Derek Higa

Last week, we upgraded both Mainland China and Japan to a Confirmed Uptrend as both staged a follow‐through day. Despite
this, we feel more confident about Japan’s market condition than China (more on this below). With the two upgrades, our APAC
market conditions have shifted more bullish, but 60% of markets are still trading below longer term moving averages, which gives
us a reason to remain a bit cautious. Additionally, the broader MSCI Asia ex Japan benchmark (Datagraph below) has yet to display
signs of positive momentum this week. A/D is still poor and it has traded flatly this week, weighed down by weak action in
heavier weighted names (e.g. Tencent).
Furthermore, we have yet to see significant rotation out of defensive sectors, although Health Care has pulled back recently. As
we mentioned in a previous note, Utilities continue to display momentum. We are keeping an eye on short‐term improvement in
Technology and noticing sharp underperformance from Materials, Transportation, and Energy. We provided names in these
sectors to keep on your radar for breakouts as well as those we believe are still vulnerable to further downside. Lastly, we
highlight two Technology names on our list, Samsung SDI ( SCT.KR; 006400:KS ) and L&F ( LAF.KR; 066970:KS ).

Global Laggards

Posted on May 10, 2018February 1, 2019 by Heetae Kim

U.S.

Cambrex Corp – Health Care ($1.6B market cap) – Cambrex develops active pharmaceutical ingredients used in the manufacture of drug products. As of December 2017, Gilead Sciences accounted for 35% of consolidated sales.

Though revenue from Gilead is expected to decline consistently over the next four years, it is still expected to make up 29% of total revenue in 2018. Of this, 26% is expected to come from Gilead’s hepatitis C drugs which continue to decline after the Company found a cure just a few years ago. Gilead announced a large sales reduction in its hepatitis C products in its recent Q1 results. This substantial decline in revenue from Gilead will need to be replaced over the next few years.
The Company reported Q1 2018 results that missed expectations. The Company reported its first y/y decline in EPS and revenue growth in the last 15 quarters.
The stock gapped down 10.5% on the results. We believe the stock will lag the general market uptrend and stay trapped below resistance along the 10- and 40-WMA, with potential downside to November lows of ~$43. We recommend cutting losses should the stock close above the 200-DMA at $52.

Developed

BE Semiconductor ( BESI.NL ) – Technology ($3.0B market cap) – BE Semiconductor (BESI) develops equipment for leadframe, substrate, and wafer level packaging applications in various end markets, including electronics, computer, automotive, industrial, LED, and solar energy. Customers include Toshiba, Samsung, NXP, Renesas, Micron, Skyworks, Sony, and Infineon.

On April 26, the Company announced Q1 2018 results that were largely in line with consensus forecasts, but it gave Q2 guidance that was significantly below consensus. As a result, shares fell 17% on 5x the average daily volume, and broke below the 40-WMA for the first time since July 2015. Shares have been unable to rebound anywhere near original levels since breaking below long-term support at the 40-WMA.
BESI expects Q2 revenue to grow 10-15% sequentially (€170-178M), below consensus of ~30% sequential growth. EBIT guidance was also below consensus. On a y/y basis, sales growth is expected to decelerate from a high of 69% in Q3 2017 and 41% in Q1 2018, to 17% in H1 2018. This cautious outlook has resulted in downward revisions to 2018 and 2019 EPS consensus forecasts.
BESI has a poor RS Rating of 50 and Datagraph Rating of 57.
Shares are trading 29% off highs after topping in March 2018.
Per consensus estimates, EPS growth is expected to decelerate from 167% in 2017 to 3% in 2018.
We anticipate shares will roll over after hitting resistance near the 40-WMA. The last time shares broke below the 40-WMA, BESI corrected more than 60% from its peak.

Market View

Posted on May 4, 2018May 4, 2018 by Raj Gupta

The U.S. market is in an Uptrend Under Pressure. After yesterday’s big upside reversal off support, indices re-main under accumulation. Regaining and holding above resistance at the 50-DMA will increase our confidence in the market. For now, we continue to advise a selective approach to buying, with a focus on high relative strength stocks, as both the Nasdaq and S&P 500 have an A/D Rating of E.

Stocks on our U.S. Focus List: Current Sentiment

Our USFL of 71 ideas (one net removal) gained 1.3% on average this week, underperforming the S&P 500 (-0.2) and in line the Nasdaq (1.34%).

By Sector
Small cap Technology ideas on the U.S. Focus List outperformed due to strong earnings results from QTWO and RP. Both ideas are extended. MB is breaking out from a cup consolidation ahead of earnings next week. Pockets of Health Care remain strong as IDXX and ABMD broke out into all-time highs on bullish earnings results. IDXX is actionable from a cup-with-handle consolidation. In Retail, WING was an outlier, after gapping up ~10%. WING remains extended. Conversely, a few names, including KLXI, PAGS, and PVH, were hit with heavy distri-bution and pulled back into their respective bases.

Global Focus Emerging Long

Posted on May 4, 2018May 5, 2018 by Raghavendra K

Mainland China’s markets closed higher over last week, led by the Shenzhen, which gained 0.73%. We moved Mainland China to an Uptrend Under Pressure on April 26, as the CSI 300 (OCHSS300) fell about 2% to year-to-date lows. We want to see the CSI 300 rise and hold above its 200-DMA (~ 3,950) to become bullish. We recommend a defensive approach for any fresh additions.

Global Focus Emerging Long

Posted on April 27, 2018April 27, 2018 by Midhun Parameswaran

Mainland China’s markets closed mixed over last week. The Shanghai index gained 0.35%, while the Shenzhen index fell 0.12%. We upgraded Mainland China to a Confirmed Uptrend on April 24, as the CSI 300 (OCHSS300) rose more than 2% on higher volume. We want to see the CSI 300 rise and hold above 200-DMA(~ 3,950) to become more bullish. We recommend a defensive approach for any fresh additions.

Global Focus Emerging Long

Posted on April 20, 2018April 20, 2018 by Midhun Parameswaran

Mainland China’s markets closed significantly lower over last week, led by the Shenzhen index, which fell 3.1%. We downgraded Mainland China to a Downtrend on April 17, as the CSI 300 (OCHSS300) fell to year-to-date lows. The number of distribution days has risen to four over the past five weeks and the followthrough day on February 22 has failed. We see 1,726 as the next level of support for the Shenzhen. We recommend a defensive approach for any fresh additions.

APAC Weekly Summary

Posted on April 18, 2018February 1, 2019 by Derek Higa

No Man’s Land, China Auto Selloff, Geely and Guangzhou, Indian Retail, Titan

The MSCI Asia is trading along its 50-DMA and has yet to find enough buying support to rise above this resistance level. Moreover, the index remains in a flat trend over the last five days and has yet to find a clear direction. Markets are trading in “no man’s land” and, until we get a clear trend, we remain cautious.

This week we downgraded Mainland China to a Downtrend but upgraded Singapore to a Confirmed Uptrend, leaving the majority (seven out of 13) APAC markets still in correction mode. Accumulation volume has been mostly lackluster for the majority of markets, but we remain open minded to the possibility of follow-through days, as five markets are in a Rally Attempt. It is difficult to be overly bullish (or bearish) in the current market conditions. The risk is being stuck in a whipsaw mentality, so a neutral approach may be the best option until there is a clearer trend. If you are in search of longs, we recommend sticking with leadership (RS near highs) and focusing on those markets (India, Korea, Taiwan) that remain in an Uptrend. Indian Retail names could be a good option. Recent addition Titan (TIT.IN; TTAN:IN) is still actionable. On the other hand, stay away from stocks that are displaying technical weakness. An example is auto-related companies in China (discussed below). Focus List name Geely Auto (MANR.HK; 175:HK) is under pressure while Guangzhou Auto (GAG.HK; 2238:HK) has declined further since its removal.

Global Focus Emerging Long

Posted on April 13, 2018April 13, 2018 by Midhun Parameswaran

Mainland China’s markets closed higher over last week, led by the Shanghai, which gained 0.89%. The market continues to be in an Uptrend Under Pressure. The Shanghai closed 4.7% below its 200-DMA (~3,314), while the Shenzhen closed 3.9% below its 200-DMA (~1,908). The 100-DMA (~1,885) continues to act as a strong resistance level for the Shenzhen. We recommend a cautious approach for any fresh additions.

APAC Weekly Summary

Posted on April 11, 2018February 1, 2019 by Derek Higa

APAC Markets find Support, India Upgrade, Retail and Staples, China K‐12 Education, TAL and Maple Leaf
Educational Systems

For the second time this year, the MSCI Asia has found support at the 200‐DMA (at least in the short term). The majority (seven of 13) APAC markets remain in correction mode but all are now in Rally Attempt setting up for the possibility of a follow‐through day. We are staying open minded about this possibility. On April 5, we upgraded India to a Confirmed Uptrend. Overall, accumulation volume continues to be below average and weaker than we prefer as many markets have now made their way back to moving averages where resistance could be. Looking ahead, we are keeping an eye out for confirmation, preferably follow‐through days that will break convincingly above the moving averages (50‐DMA or 200‐DMA). Until then, we remain cautious and continue to advise a defensive approach especially for markets in correction.

Standing out in Sector Rotation this week is Retail and Staples. Retail is now outperforming over a 26‐week period and has
improved significantly in past four weeks . The Staples sector has also displayed relative improvement in the short term. We
recently added Titan ( TIT.IN; TTAN: IN ) and China Mengniu Dairy ( MNDA.HK; 2319: HK ) to our Focus List. Lastly, shares of Chinese K‐12 education names, China Maple Leaf ( MAPZ.HK; 1317: HK ) and TAL Education ( TAL ) on our Focus List continue to be constructive despite a volatile market. We reiterate our thoughts on the theme.