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:

  • The MSCI Asia has finally pulled back after rallying for six weeks. We shifted Hong Kong back to an Uptrend Under Pressure, leaving six out of 13 APAC markets in a Confirmed Uptrend.
  • The average number of distribution days in APAC increased to 3.4 from 2.0 in the last week. In the last five trading sessions, Hong Kong and South Korea registered three distribution days.
  • Prior to this week, there had been steady improvement in the number of stocks breaking out.
  • Japan’s market is in a Confirmed Uptrend with two distribution days and is currently extended after strong gains since September. Approximately 82% of liquid stocks in Japan are trading above their 200-DMA, compared with only 55% in APAC. The number of extended stocks is higher among small caps and Technology. Refer to page 8 for a list of extended stocks in Japan.
  • Refer to page 9 for actionable ideas in APAC.

Disney

Posted on by Derek Higa

Key points:

 

  • Disney shares are forming a stage-two flat base and are currently trading 3% below a pivot. We recommend investors aggressively add to positions as shares rise above short-term resistance of $141. The stock is constructively building the right side of a base.
  • Today, shares are rising on news that Disney+ surpassed 10M sign-ups on the first day of its launch (guide was for 60M–90M worldwide by FY24). We continue to believe the combination of Hulu, ESPN+, and Disney+ will put Disney among the most appealing value options for users cutting the cord.
  • The company has moderate fundamental ratings: EPS Rank of 43, SMR Rating of
    B, Composite Rating of 69. Higher investments in the company’s DTC platform have affected EPS and margin.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

 

 

  • MSCI Asia is strengthening, now only 3% below its 52-week high from April.
  • APAC markets are improving: eight out of 13 markets are in a Confirmed Uptrend. The average distribution day count declined to 2.0 from 3.6 last week following market condition improvement on the back of U.S.–China trade deal optimism.
  • On November 4, we shifted Thailand and Hong Kong to a Confirmed Uptrend.
  • We reiterate that Japan, India, China, and Taiwan are our preferred overweight markets.
  • Japan is trading at 52-week highs, led by improvement in Basic Material, Consumer Cyclical, Health Care and stability in Retail. Refer to page 6 for the sector rotation chart and page 7 for an annotated chart of the Nikkei 225.
  • Highlighted Focus List idea: Fast Retailing ( RETA.JP ) is close to pivot. Refer to page 9 for an annotated chart.
  • Refer to page 10 for notable ideas near pivot in Japan.
  • Refer page 11 for actionable ideas on our Focus List.

 

  • MSCI Asia is strengthening, now only 3% below its 52-week high from April.
  • APAC markets are improving: eight out of 13 markets are in a Confirmed Uptrend. The average distribution day count declined to 2.0 from 3.6 last week following market condition improvement on the back of U.S.–China trade deal optimism.
  • On November 4, we shifted Thailand and Hong Kong to a Confirmed Uptrend.
  • We reiterate that Japan, India, China, and Taiwan are our preferred overweight markets.
  • Japan is trading at 52-week highs, led by improvement in Basic Material, Consumer Cyclical, Health Care and stability in Retail. Refer to page 6 for the sector rotation chart and page 7 for an annotated chart of the Nikkei 225.
  • Highlighted Focus List idea: Fast Retailing  ( 

     

    ) is close to pivot. Refer to page 9 for an annotated chart.

  • Refer to page 10 for notable ideas near pivot in Japan.
  • Refer page 11 for actionable ideas on our Focus List.

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.

 

  • Since October 15, the MSCI Asia ex Japan index has edged higher above the 200-DMA. With the Fed’s decision on deck, we remain cautiously optimistic.
  • This week we shifted India to a Confirmed Uptrend from an Uptrend Under Pressure. Japan has made new 52-week highs and Taiwan has reached all-time highs. New Zealand was shifted to an Uptrend Under Pressure.
  • Taiwan is in a Confirmed Uptrend with three distribution days. Five of 11 sectors are trading above their 200-DMA. We would like to see strength broaden across the sectors as the market continues to make new highs. Refer to page 6 for a chart of the Taiwan SE Weighted Index.
  • South Korea is in a Confirmed Uptrend with five distribution days. The index is trading 0.7% below its 200-DMA, which has been acting as stiff resistance since February 2018. Only Technology and Energy of 11 sectors are trading above their 200-DMA. Refer to page 7 for an annotated chart of the KOSPI.
  • Refer to page 8 for stocks near pivot in Taiwan and South Korea. Refer to page 9 for actionable ideas in APAC.
  • Highlighted stock: Koh Young Technology ( KYX.KR )

Oct 24, 2019 – Best Investment Themes in APAC

Posted on by Derek Higa

With only a few APAC markets in a Confirmed Uptrend and the number of distribution days elevated, we remain cautious. However, outlying themes like India FMCG, HK Healthcare, and Thai Alt Energy are still working during this volatile period. In this week’s webinar, Director, Research Analyst Derek Higa will highlight current APAC themes, market conditions, and sector rotation. He will also be joined by other William O’Neil + Co. sector analysts for a discussion of themes and stock ideas you should be watching in the region.

APAC Weekly Summary

Posted on by Derek Higa

Key points:

 

  • APAC market conditions: Five out of 13 markets are in a Confirmed Uptrend. Average distribution is rising.
  • We recommend a gradual approach to allocating capital; be selective of leading markets and outlying leadership.
  • Our preferred markets are Japan, India, and Taiwan ( China A Shares ).
  • MSCI Asia ex. Japan ( AAXJ ) testing resistance at the 200-DMA.
  • Current Focus List exposure compared with end of last year:

By geography: China has the highest exposure, compared with India last year.

By sector: Technology has the highest exposure, compared with Financial last year.

  • Study on five-year history of Focus List additions and removals.
  • Highlighted key sector trends in Japan, India, Hong Kong, and China.
  • Our thoughts on Japan value versus growth stocks.
  • Corporate tax cut impact on Indian stocks and outperforming ideas.
  • Highlighted themes:

Hong Kong Health Care: Wuxi Apptec ( WUXA.HK ), Jinxin Fertility Group ( JIFG.HK )

India FMCG: Colgate Palmolive ( COP.IN )

Thailand Renewable energy growth: Global Power Synergy ( GPS.TH )

Taiwan 5G/IOT Theme: Taiwan Semiconductor Manufacturing ( TSM.TW )

  • Other high conviction Focus List ideas.
  • Lagging stocks with negative alerts.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

 

 

 

  • We have turned more cautious on APAC as several major markets (Australia, India, Hong Kong) have shifted to an Uptrend Under Pressure and average distribution continues to rise in consecutive weeks.
  • Five out of 13 markets are in a Confirmed Uptrend, four are in an Uptrend Under Pressure, two are in a Rally Attempt, and two are in a Downtrend.
  • We shifted Australia and India to an Uptrend Under Pressure from a Confirmed Uptrend and downgraded Indonesia to a Downtrend.
  • Despite an increase in volatility recently, the number of Focus List removals has not increased significantly. Resilience in China A Share ideas has contributed thus far.
  • Highlighted Focus List ideas: Samsung Electronics ( SGL.KR ) and Taiwan Semiconductor Manufacturing ( TSM.TW ). Refer to pages 5 and 7 for annotated charts, respectively.
  • Refer to page 8 for actionable ideas in APAC.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

 

 

 

  • Seven of 13 APAC markets are in a Confirmed Uptrend, three are in an Uptrend Under Pressure, two are in a Rally Attempt, and one is in a Downtrend. We remain cautious overall on APAC markets amid increasing volatility and the clustering of distribution.
  • China is in a Confirmed Uptrend with an elevated five distribution days. Hong Kong is in an Uptrend Under Pressure with just one distribution day and is trading below its key moving averages. Refer to pages 6 and 7 for annotated charts of the CSI 300 and Hang Seng, respectively.
  • Chinese ADR were under pressure last week following news of potential investment restrictions by the U.S. government. The KWEB ETF, which tracks Chinese internet companies, continues to weaken, exhibiting resistance at its 40-WMA. Refer to pages 8  and 9 for annotated charts and comparisons with the S&P 500, CSI 300, and Hang Seng. Page 10 has an annotated chart for Alibaba ( BABA ).
  • Highlighted Focus List ADR: ZTO Express ( ZTO ). Annotated chart on page 5.
  • Refer to page 11 for a list of Chinese ADR holding well above their 200-DMA as well as those with the highest negative alerts.
  • See page 12 for actionable ideas in APAC.

APAC Market Update

Posted on by Derek Higa

Key points:

 

  • We are upgrading India to a Confirmed Uptrend from a Rally Attempt today after the index staged a day-five follow-through day. The index gained 1% on higher volume than the previous session and almost 20% higher than average. Since the corporate tax rate cuts were announced on Friday, September 20, the index has rallied ~8% on strong volume and is trading 3% off highs. The average volume for the past five sessions is 60% greater than the last 50 trading days’ average volume. We believe investor sentiment has turned constructive following Friday’s 5% gain, the largest single-day gain in almost a decade.
  • We recommend selectively allocating capital to growth ideas that are at entry points and not chasing extended ideas. Look for entries along pullbacks to moving averages or near-term price support.
  • See our note for growth ideas in India with high EPS growth, high ROE, and tax rates greater than 30% in the previous fiscal year.