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 Market Update

Posted on by Derek Higa

China in Confirmed Uptrend with Caveats

We are upgrading Mainland China markets to a Confirmed Uptrend as the Shanghai and Shenzhen gained 2% and 1.9%, respectively, today, on higher volume than yesterday. The CSI 300 (see Datagraph) has also displayed similar action. Considering the follow-through day, we recommend a gradual approach to buying stocks, with a few caveats:

• Chinese Markets are still testing key resistance levels. All major indices are still below their respective 50-DMA which could serve as major resistance. Furthermore, markets are still well below 52-week highs, the lowest among all APAC markets. To stay bullish, look for a break above moving averages as a first signal and for indices to hold above them for additional confirmation.

• Volume is still lighter than average. Accumulation volume came in heavier than Wednesday’s light pre-holiday volume, but it is lower than the 50-day average and much lower than the heavy distribution days earlier this month. There could still be significant overhead to fight through and volatility could remain high. To stay bullish, look for increasing accumulation volume which would indicate greater support for a move higher.

• Stock Leadership. Stock leadership and breakouts as markets gain further momentum would be bullish. Keep a close eye on stocks that are rising above and holding their 50-DMA. Stocks that hold up the best during corrections are strong candidates in our view. On the bearish end, we do not want to see these stocks (RS of 90 or above) break down further below moving averages. We have provided a list of ‘A’ share names (see page 2) to keep on your radar.

APAC Weekly Summary

Posted on by Derek Higa

After a rebound off its 200‐DMA, the MSCI Asia is trading above its 50‐DMA again. Going forward, we are looking for the index to continue to hold above its 50‐DMA, which would be constructive in our view. Additionally, other positive signs to look for include tighter ranges in indices in the near term, a decline in distribution (from 5.5 days on average currently), and an increase in stocks breaking out. Many leading stocks (those with RS Ratings of 90 or above) have bounced back last week and have retaken their 50‐DMA. Look for these names to hold above this level and for it to serve as support going forward. Overall, we are still waiting for confirmation in certain markets but the action is mostly positive.

Asia Watch

Posted on by Derek Higa

Today’s must-reads in Asia, curated by O’Neil Research Analysts. Asia Watch.
February 2, 2018 Derek Higa 310.448.6910

Retail/Consumer Cyclical

Eternity or Identity? What Diamonds Mean to Chinese Millennials (jingdaily)

Instant cameras growing popular with Japanese photo-sharing fans hungry for ‘instagenic’ shots (japantimes)

Tencent, Sony establish new label for electronic dance music in Asia (scmp)

‘China’s Netflix’ scores massive hip-hop talent show blockbuster thanks to AI (scmp)

Chinese and Indian Consumers Want Different Things From Luxury (jingdaily)

Technology

Japan’s Line to launch cryptocurrency exchange as nation reels from Coincheck hack (japantimes)

Alibaba is reshaping city traffic with artificial intelligence (qz)

Consumer Staples

A soybean shipment to China became the first commodity deal to use blockchain tech (bi)

Macroeconomic

India Inc is skipping the stock market party. Nobody is sure why (qz)

India’s farmers aren’t all the same, but government policies rarely reflect that (qz)

India’s big disinvestment win this year may just be a one-off event (qz)

Only transparency can fix the crisis in India’s supreme court (qz)

Hong Kong is so expensive that architects are building 100-square-foot ‘tube homes’ made from concrete water pipes (bi)

Hong Kong Takes Title for Least Affordable Housing for 8th Year (bloomberg)

A Chinese conglomerate struggling with billions in debt is reportedly hounding its own employees for money (bi)

 
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

Posted on by Derek Higa

Volatility Rising but Failed Breakouts Low, HK Extending, BUY Nintendo Breakout

The MSCI Asia continues to test the upper channel line. Over the last three days volatility has picked up with an increase in distribution days for individual APAC markets, especially Japan. A/D has also pulled back, but is still trending positively since December. Markets remain extended from a historical perspective, so there is still a high probability of some consolidation near term. This does not mean we have seen the top of markets, nor do we recommend anticipating one. There are still positive signals, many of which we pointed out over the last few weeks. Additionally, the number of failed breakouts are not elevated from a historical standpoint (see below) and consolidation could be healthy within the longer term uptrend. The MSCI is 2% from 52-week highs and a pullback to the 50-DMA (-5%) would be normal. We remain bullish, but continue to recommend a conservative approach of only buying on breakouts and avoiding extended names. We also recommend trimming positions on extended names (see below).

Grubhub Reiteration

Posted on by Derek Higa

Grubhub Inc. (

) shares are currently actionable, trading within an upward channel. The Company will report Q4 2017 results on February 8. In Q3 2017, it reported record revenue and double-digit growth in daily average orders and gross food sales serving 9.8M diners. A/D Rating B-. RS Rating 95. 1.5x Up/Down volume ratio.

Asia Watch

Posted on by Derek Higa

Today’s must-reads in Asia, curated by O’Neil Research Analysts. Asia Watch.
January 19, 2018 Derek Higa 310.448.6910

Technology

Most people do not know what to do with e-waste;  only a fraction recycle: NEA study (channelnewsasia)

Video: What’s unique about China’s deep learning startups (techinasia)

China Has Its Own Alexa, But It’s No Meer Knockoff (fastcompany)

Consumer Staples

Euro Surge to Curb Remy Cointreau Profit Despite Cognac Revival (bloomberg)

Pollution

China’s air quality improved in 2017,  environment ministry says (scmp)

Cryptocurrency

Report says North Korean  hackers have been targeting South Korean cryptocurrency exchanges (bi)

Macroeconomic

China’s two-child policy has already stopped working (qz)

Strong wage growth key to beating deflation, Japanese government says in report before corporate wage talks (japantimes)

Despite diplomatic rows, Japan and South Korea are  growing closer(economist)

Xi Expected to Be  Written Into Chinese Constitution (bloomberg)

 
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 . For important information about reports, our business, and legal notices please go to williamoneil.com/legal.

APAC Weekly Summary

Posted on by Derek Higa

Market Conditions, Japan Reset, HK Set Up, China Education and Maple Leaf

 

 

Much has happened to APAC markets in just two weeks. The MSCI Asia tested the 200-DMA for the first time since 2016. Alongside this, we downgraded five APAC markets to Downtrend as distribution increased and markets broke respective support levels. In recent days, the MSCI has bounced back rising back above the 50-DMA on above average volume. Volatility both ways has us wondering whether we are now in a whipsaw market environment or just a normal but quick reversion to the mean as part of a strong global bull cycle.

 

At O’Neil, our methodology intends to keep the emotion out and make sound judgments on market direction based on guidelines from historical precedence. In this week’s note we attempt to explain more about our current thoughts on APAC markets and take the time to review the guidelines we use for our market condition calls (if you have questions feel free contact me). We are focusing on Japan and Hong Kong as they seem to be acting in opposite directions this week and point out what we see in the Datagraph. Overall, our sentiment is more optimistic from last week’s note. We are noticing some positive signs and are awaiting confirmation.