Some highlights from the report
U.S.
EMEA
APAC
We are upgrading Mainland China markets to Confirmed Uptrend as the CSI 300 (see Datagraph) rose more than 2% on greater volume than the previous day (Day 5 Rally Attempt). The Shanghai and Shenzhen were also up 2% or more today. Note, volume remains below average and the indices continue to trade below 50-DMA and 200-DMA resistance. Despite the follow-through day, we remain cautious (but open minded) due to high market volatility. We recommend a gradual approach to buying stocks. Looking ahead, we want to see the CSI 300 rise and hold above ~3,950 to become more bullish. The index must hold above the low of April 18 (~3,708) for the follow-through day to remain intact and avoid failure.
Today’s must-reads in Asia, curated by O’Neil Research Analysts. Asia Watch. |
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| April 20, 2018 | Derek Higa 310.448.6910 |
Retail/Consumer CyclicalChina’s coddled EV makers will now face unleashed competition from the likes of Tesla (qz) After turning exam prep into a booming business, India’s newest unicorn is going global (qz) TechnologyQualcomm is getting hit from both sides in the US-China spat (qz) FinancialWith funding from a Tencent founder, he’s simplifying cross-border money transfer (techinasia) HealthcareA Chinese farm is breeding 6 billion cockroaches a year for medicine (qz) MacroeconomicScrambling to Print More Currency (bloomberg) Why Hong Kong’s Central Bank Intervened and Should We Worry? (bloomberg) Chinese local governments’ US$2.4 billion of concealed debts is uncovered by audit office (scmp) ‘Big Brother’ in India Requires Fingerprint Scans for Food, Phones and Finances (nytimes) MISCChina is obsessed with stopping jaywalkers — and is now spraying them with water (bi) The Chinese navy challenged Australian warships in the South China Sea as it conducted its largest-ever naval parade (bi)
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| WILLIAM O’NEIL+CO | Institutional Sales | 12655 Beatrice Street | Los Angeles, CA 90066 | 800.545.8940 | |
| William O’Neil + Co. Incorporated is a Registered Investment Advisor with the State of California and certain other states. Employees of William O’Neil + Company and its affiliates may now or in the future have positions in securities mentioned in this communication. Our content should not be relied upon as the sole factor in determining whether to buy, sell, or hold a stock. For important information about reports, our business, and legal notices please go to williamoneil.com/legal. | |
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.
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.
K-12 Chinese education stocks on our Focus List have consolidated constructively and remain near pivot points despite market volatility. Furthermore, RS for these names continue to be near 52-week highs, outperforming the majority of stocks in their respective markets. We continue to believe there is room for price appreciation as the Chinese student population is expected to continue to grow in the long term due to a rising middle class, increasing urbanization, and a new two child policy. The Chinese education system is also highly competitive and demand for high-level education begins at an early age. The market is still fragmented and leading education providers will benefit as the market consolidates. We currently have two Chinese education names on our Focus List: China Maple Leaf (MAPZ.HK; 1317: HK)
Today’s must-reads in Asia, curated by O’Neil Research Analysts. Asia Watch. |
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| April 06, 2018 | Derek Higa 310.448.6910 |
Retail/Consumer CyclicalPhilippine Shopping Mall Giant to Build Nation’s First Ikea Store (bloomberg) A deal to buy a Chinese bike-sharing giant will accelerate the rivalry for consumer movement data (qz) TechnologyIndia’s ministry of defence website was hacked, part of a disturbing trend (qz) A Chinese hospital is betting big on artificial intelligence to treat patients (qz) H-1B: All the obstacles standing between Indian techies and their prized visa (qz) Consumer StaplesChina soybean salvo is well-timed shot in trade skirmish (marketwatch) MacroeconomicHow China’s ‘Made In China 2025 Is Playing Into The Tariff Exchange With The U.S. (npr) Can someone ask India’s central banker some tough questions please? (qz) Japanese wages are still going backwards after inflation (bi) MISC‘Boyfriend-sharing’ services hit Chinese shopping malls (but don’t get the wrong idea, they just carry your bags) (scmp) China Isn’t Happy About its Newest Internet Stars: Teenage Moms (nytimes) Inside the most expensive part of the world’s most expensive city, the Hong Kong billionaire enclave where Alibaba founder Jack Ma may have bought a $191 million mansion (bi) |
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| WILLIAM O’NEIL+CO | Institutional Sales | 12655 Beatrice Street | Los Angeles, CA 90066 | 800.545.8940 | |
| William O’Neil + Co. Incorporated is a Registered Investment Advisor with the State of California and certain other states. Employees of William O’Neil + Company and its affiliates may now or in the future have positions in securities mentioned in this communication. Our content should not be relied upon as the sole factor in determining whether to buy, sell, or hold a stock. For important information about reports, our business, and legal notices please go to williamoneil.com/legal. | |
The MSCI Asia is testing 200-DMA support for the second time this year as the majority of Asian markets are turning bearish for the first time since pre-2017. This week we downgraded three markets: Hong Kong, Thailand, and Singapore. Performance for a majority of Asian markets is negative YTD. Further painting a bearish picture is the low number of stocks breaking out and near pivot (buy points) currently. Our sentiment remains unchanged as we have become increasingly cautious as global volatility has picked up over the last few weeks. We continue to advise a defensive approach.
Through all the negatives, there are still positives to point out. The majority of names on our list are currently still holding support levels above the 50-DMA (including those recently removed) and we are still noticing outperformance in Hong Kong Health Care names. This week, we provide a few Focus List names with Relative Strength that have made new 52-highs recently. Despite market conditions, these names are outperforming and core positions should continue to be held. On the opposite end, we also provide those that we believe should be kept on close watch due to high base stage count and/or weak share price action given current market conditions.
Today’s must-reads in Asia, curated by O’Neil Research Analysts. Asia Watch. |
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| March 29, 2018 | Derek Higa 310.448.6910 |
Retail/Consumer CyclicalUber’s defeat in Southeast Asia calls into question its “barge in” expansion strategy worldwide (qz) TechnologyChinese smartphone vendors take on WeChat’s mini programs (bi) Consumer StaplesChina’s Craving for Fiery Liquor Boosts Outlook for Moutai (Bloomberg) India can’t eliminate tuberculosis by 2025 without curbing smoking (qz) MacroeconomicChina isn’t killing the US in trade by as much as we think (bi) Australia Should Chill Out About Chinese Cash, Watchdog Says (bloomberg) MISCKim Jong Un’s secret trip to China was full of gourmet food, wine, and music — take a look inside the lavish visit (bi) Japanese prime minister Shinzo Abe is losing his grip on power at the worst possible time (bi) Why a future fight between China and Taiwan might open with a devastating blow to a US city (bi)
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| WILLIAM O’NEIL+CO | Institutional Sales | 12655 Beatrice Street | Los Angeles, CA 90066 | 800.545.8940 | |
| William O’Neil + Co. Incorporated is a Registered Investment Advisor with the State of California and certain other states. Employees of William O’Neil + Company and its affiliates may now or in the future have positions in securities mentioned in this communication. Our content should not be relied upon as the sole factor in determining whether to buy, sell, or hold a stock. For important information about reports, our business, and legal notices please go to williamoneil.com/legal. | |
Markets Shifting Negative: HK, China, Korea, Tencent weakness, Utilities Improving
More APAC markets are trading below their 50-DMA, downside volatility is picking up, and support levels are being tested. Markets are flashing negatives again after being mostly positive in the past two weeks. Our sentiment is becoming more negative as distribution days are picking up again. We advise a cautious approach. Furthermore, many markets in uptrend are now trading below their respective follow-through days, now testing February lows. The majority of APAC (and global) markets are clearly Under Pressure or in correction mode. Those that are closest to being downgraded include Hong Kong, Mainland China, and South Korea ( Datagraphs below ). These are on the verge of shifting to Downtrend again after having follow-through days within the last two months. Looking at the MSCI benchmark, the 200-DMA continues to serve as key support. This level has held since 2017 and a break below over the coming days would be significantly bearish in our view.
