Today’s must-reads in Asia, curated by O’Neil Research Analysts. Asia Watch. |
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| March 23, 2018 | Derek Higa 310.448.6910 |
Retail/Consumer CyclicalA little-known Chinese firm funds 50% of India’s sports sponsorship (qz) China’s young consumers are snubbing foreign brands amid growing national pride, says Credit Suisse (scmp) TechnologyWhy America is so scared of China’s biggest tech company (Bloomberg) Chinese drone maker DJI is looking to raise $500 million (fastcompany) After faces, China is moving quickly to identify people by their voices (qz) MacroeconomicHong Kong vows to hit back against any ‘discriminatory’ US trade actions (scmp) Test Limit of Abe’s Charm Offensive (bloomberg) Beg, Borrow or Steal: How Trump Says China Takes Technology (nytimes) China’s New Central Banker Is Just as Important as the Fed’s (nytimes) MISCOver 300,000 rats were killed in an Indian government office. Now, a scam brews (qz)
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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. | |
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
Despite downgrades of two Southeast Asian markets over the trailing week, the positives seem to still outweigh the negatives in the APAC region. Average distribution days have declined for the second week and pressure seems to be more narrow and specific to individual markets rather than the broader selloff we witnessed back in February. A majority of markets are also in Uptrend and the MSCI Asia is still holding above the 50‐DMA constructively. In the weaker major markets, specifically Japan and India, we are still noticing pockets of strength. Overall, we believe action remains mostly constructive and in the near term, we are waiting for accumulation volume to return which would be confirmation for a more bullish sentiment in our view.
This week, we reiterate the pressure we are noticing in Southeast Asian markets with the downgrade of the Philippines and Indonesia. In our Sector Rotation, much of what we mentioned in recent weeks has not changed. We continue to notice leadership in Health Care and a resurgence in Technology (mentioned last week). Elsewhere, we are noticing some improvement in Retail. While the Cyclical sector has lost some momentum in recent weeks, Retail has seemed to take its place and is rising in the short term. Last, we highlight Zhongsheng Group (ZSG.HK; 881: HK) which is actionable on our Focus List.
Asia Watch
Today’s must-reads in Asia, curated by O’Neil Research Analysts. Asia Watch. |
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| March 16, 2018 | Derek Higa 310.448.6910 |
Retail/Consumer CyclicalCar costs make Singapore world’s most expensive city for expats for 5th year running: EIU survey (channelnewsasia) TechnologyChina’s esports market is booming – and now it’s going mobile (techinasia) Video: Virtual today, real VR arcades usher in the future of gaming (techinasia) Video: China’s tech giants want to take your money whether you’re online or offline (techinasia) Mobile PaymentsMobile Payments Seen as More Secure by Chinese Shoppers Abroad (jingdaily) PollutionTrump Condemns Chinese Factories. China Is Already Closing Some. (nytimes) China Unveils Superagencies to Fight Pollution and Other Threats to Party Rule (nytimes) Four Years After Declaring War on Pollution, China Is Winning (nytimes) Consumer StaplesWomen Are Never Too Young For Anti-Aging Creams in China (jingdaily) MacroeconomicChina just got one step closer to ending its family-planning policies (qz) Don’t push us, China says to Trump’s demand for US$100 billion cut in the Sino-US trade gap (scmp) MISCAbe’s Bad Month Gets Worse as Allies Press Him Over Scandal (Bloomberg)
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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. | |
APAC Weekly Summary
Since last week the MSCI Asia has found its way back above the 50‐DMA, continuing to be volatile in both directions. The roller coaster ride continues. Despite this, there are more notable positives this week, including an upgrade of Hong Kong’s market to
Confirmed Uptrend on Monday. It joins South Korea, Taiwan, and Mainland China, which we upgraded the previous weeks. Also, distribution days have declined below 4 on average and are less elevated than last week. This is a relief. We are more cautious on Japan and India, which are both in a Rally Attempt but there are still pockets of strength. Overall, we are noticing more constructive action in APAC this week and are becoming less cautious. Going forward, we are looking for markets to trend higher above support levels to keep bullish momentum going.
This week, we review our market condition change in Hong Kong and point out the noticeable recovery in Technology. We added back a few names, including Sunny Optical and Tokyo Electron, to our Focus List. Lastly, we reiterate our BUY conviction in Nintendo.
Old Media vs. New Media
- A majority of old media groups continue to rank among the lowest out of our 197 Industry Groups. The Media-Radio/TV group, which is holding up relatively better, has been the only exception.
- TV subscribers continue to ‘cut the cord’ with subscriber losses accelerating year-over-year for major pay TV companies. Although the rolling back of net neutrality rules could improve monetization for these companies, we do not believe it will reverse this secular trend.
- We see more M&A for local TV broadcasters. We added Nexstar to our Focus List in January 2018. We believe the company has the best O’Neil Ratings and Rankings in the group. We recommend continuing to hold positions as shares consolidate.
- Competition is heating up as Disney joins the OTT space. This confirms a pivotal change for the media video landscape. Since this is a major strategic shift for Disney, it will take time to play out, which is why we are neutral on DIS shares. We think the Company must still execute and prove it can grow after its stock peaked in 2015.
- We continue to like Netflix, which we added to our Focus List in January 2017. It is the leading innovator in the group, but shares are currently extended from an entry point. We recommend trimming profits from core positions and waiting for share consolidation.
APAC Weekly Summary
The MSCI Asia continues to trend under the 50‐DMA after breaking below it last week. Volume for the index remains low which could be a positive sign if markets continue to decline, suggesting a possible lack of institutional selling. Conversely, it would be more concerning if volume begins to pick up like it did during the pullback in February. Distribution days are still high among individual markets and this week we downgraded Japan and India. On a more positive side, we upgraded South Korea to Uptrend due to a technical follow‐through day but we note that the KOSPI is still below the 200‐DMA which could serve as near‐term resistance (discussed more below). Overall, we continue to be cautious and advise a conservative approach to buying given that many APAC markets have an Uptrend Under Pressure status.
This week, we explain our recent market condition changes and provide names in Japan and India that are displaying strong
Relative Strength. Although we normally do not recommend buying in Downtrends, we believe these names should be kept on
your radar as they are trading constructively relative to the market. We are still noticing leadership in Health Care and an
improvement in Consumer Cyclical, but we have highlighted a few actionable names from the Consumer Staples sector should
clients need more defensive ideas.
Asia Watch
Today’s must-reads in Asia, curated by O’Neil Research Analysts. Asia Watch. |
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| March 2, 2018 | Derek Higa 310.448.6910 |
Aerospace DefenseChina’s military fires up world first in revolutionary rail gun technology (scmp) Consumer CyclicalMaruti Suzuki Alto sales cross 35 lakh units (indiatimes) Netflix acquires rights to Singapore-born filmmaker Sandi Tan’s Shirkers (channelnewsasia) HealthcareIn Seoul, A Plastic Surgery Capital, Residents Frown On Ads For Cosmetic Procedure (npr) TechnologyChinese police are using facial-recognition glasses to scan travelers (bi) Asia news roundup: Ant aims for hectocorn status, Didi sets sights on Japan (techinasia) 54% of Singaporean children exposed to at least 1 cyber risk: Study (channelnewsasia) How Line works with independent developers to innovate (techinasia) A Chinese smartphone company no one has ever heard of is making a huge impact in 2018, and it’s innovating more than Apple or Samsung (bi) Young people in Japan spend an average of 160 minutes online every weekday, survey finds (japantimes) Singapore semiconductor growth to ease in 2018: Industry group (channelnewsasia) Why gaming could be a ‘killer app’ for the blockchain (techinasia) Chinese Smartphone Maker Xiaomi Weighs Listing in Mainland and Hong Kong (wsj) MacroeconomicA study of Indian garment workers shows the productivity power of soft skills (qz) |
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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. | |
APAC Weekly Summary
As with most global markets, February has been a roller coaster for APAC markets. Looking at the MSCI Asia, a swift selloff began at the end of January and only lasted into the first full week of the month. This was quickly followed by a rebound to the 50-DMA. The benchmark has settled down in the most recent week, with below average volume, which may be largely due to the long Lunar holiday. Distribution remains elevated with many markets in an Uptrend Under Pressure, so we continue to recommend a cautious approach to buying stocks. This week’s action is constructive but we are not overlooking a continued shake out scenario especially after a strong 2017. There may be many reasons (rising interest rates being most significant) to believe we are closing in on the end of a strong global bull cycle but we remain unbiased and largely focused on the market trends that are the cornerstones of the O’Neil Methodology
In this week’s note, we reviewed what happened in APAC markets this month from an O’Neil perspective by examining current market conditions in major markets and assessing sector strength and relative performance using our Sector Rotation Graph. We believe the Consumer Cyclical sector should be watched closely as relative performance is improving.
APAC Weekly Summary
As with most global markets, February has been a roller coaster for APAC markets. Looking at the MSCI Asia, a swift
selloff began at the end of January and only lasted into the first full week of the month. This was quickly followed by a rebound
to the 50-DMA. The benchmark has settled down in the most recent week, with below average volume, which may be largely
due to the long Lunar holiday. Distribution remains elevated with many markets in an Uptrend Under Pressure, so we
continue to recommend a cautious approach to buying stocks. This week’s action is constructive but we are not overlooking a
continued shake out scenario especially after a strong 2017. There may be many reasons (rising interest rates being most
significant) to believe we are closing in on the end of a strong global bull cycle but we remain unbiased and largely focused on
the market trends that are the cornerstones of the O’Neil Methodology.
In this week’s note, we reviewed what happened in APAC markets this month from an O’Neil perspective by examining current
market conditions in major markets and assessing sector strength and relative performance using our Sector Rotation
Graph. We believe the Consumer Cyclical sector should be watched closely as relative performance is improving.
APAC Weekly Summary
With all APAC markets in Confirmed Uptrend, we are still bullish on the region overall. The MSCI Asia continues to test 52-week highs and share price action continues to be strong. Our only gripe is volume. Volume continues to be light for the index and we have yet to see a positive change in Accumulation/Distribution (A/D) trend. Given this, it would not be surprising to see a slight pull back as markets reach short term resistance especially in extended markets like Hong Kong (12% above 40-WMA). Should upside volume arrive (above average), we would anticipate improvement in the MSCI’s A/D rating which has yet to display much improvement from D+.
