Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on April 4, 2018

KUALA LUMPUR: Technology stocks on Bursa Malaysia came under fresh selling yesterday following on the heels of further declines in US tech counters and amid worries of escalating trade tensions between the US and China. The bearish sentiment in the tech sector was made worse by US President Donald Trump’s fresh attack on Amazon, blaming the digital retailer for the US Postal Service’s financial woes.

Analysts said the high valuation of tech stocks, after last year’s rally, have made them more vulnerable to the current cautious sentiment. They said investors are concerned about a trade war, putting aside their earlier optimistic view of the continued growing demand for semiconductor products and smart gadgets.

Areca Capital Sdn Bhd chief executive officer Danny Wong, who manages over RM700 million in assets, said he is worried that there will be more tariffs from the world’s top two largest economies.

China two days ago raised tariffs by up to 25% on 128 US products, escalating a dispute between the two countries in response to US duties on imports of aluminium and steel.

“A significant part of US technology products supply chains involve China, and Malaysia’s tech players [are] also part of these supply chains,” Wong told The Edge Financial Daily. “If there is a full-blown trade war between the US and China, orders to our tech companies may be affected. So we are cutting our exposure to this segment.”

Among the local tech counters hit, Inari Amertron Bhd was the biggest loser in terms of market capitalisation, as RM1.76 billion worth of its market value has been wiped off year to date (YTD).

Inari was valued at RM5.73 billion at yesterday’s closing price of RM2.55, a fall of 27 sen or 9.57% compared with Monday. The counter was the sixth biggest loser on Bursa yesterday.

VS Industry Bhd, another major decliner yesterday, saw its market capitalisation come down by RM1.38 billion since the beginning of the year — including RM318.63 million yesterday — to RM2.82 billion. The counter fell 24 sen or 10.86% to RM1.97.

Unisem (M) Bhd, whose share price dropped to a 14-month low of RM2.39 yesterday, has lost RM924.63  million in market capitalisation YTD.

The Bursa Malaysia Technology Index yesterday fell 1.29 points or 3.96% to 31.26, the biggest percentage fall among all the local indices.

KESM Industries Bhd, the second biggest declining stock yesterday, saw its share price fall 96 sen or 5.19% to RM17.54, giving it a market capitalisation of RM779.42 million.

Malaysian Pacific Industries Bhd, fell 16 sen or 1.88% to RM8.34 for a market capitalisation of RM1.66 billion, which is RM851.28 million lower than what it was in the beginning of the year.

In a statement yesterday, Moody’s Investors Service said China’s new retaliatory tariffs on US exports is limited if it is measured in terms of dollars of US exports affected relative to total US exports.

However, for firms, sectors and localities that depend on revenues from exports of items targeted by the tariffs, the impact will be more significant, according to the credit rating firm.

“As we have noted before, the importance of tariff announcements by both the US and China lies in what they may portend for overall bilateral trade and investment relations between the two countries. Moreover, the US and China are the world’s two largest economies and they play a large role in global trade, production supply chains and investment.

“Therefore, their policy actions would likely have global macroeconomic and credit implications,” said Moody’s.

Although the macroeconomic impact of tariffs may appear limited when measured by the dollar value of goods affected, Moody’s said if such tariffs are seen by global market participants as signalling an escalation in trade tensions, they will eventually have a broader macroeconomic impact by dampening market sentiment as well as business investment decisions.

“Financial markets have demonstrated their sensitivity to trade announcements over the past several weeks. However, whether actual domestic or cross-border business investment in particular sectors slows down as a result of rising trade tensions is yet to be seen,” said the rating agency.

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