This article first appeared in The Edge Financial Daily on August 16, 2017
KUALA LUMPUR: For Bursa Malaysia, technology counters have been quick to rebound after a short-lived sell-off last week, as bargain hunters took cues from recovery in US tech counters and in anticipation of improved results in the second quarter of this year.
Reuters has reported that the S&P 500 posted its biggest one-day percentage gain since April on Monday, helped mostly by gains in tech shares after worries eased about a conflict between the US and North Korea.
The Philadelphia Semiconductor Index, comprising 19 US semiconductor companies, was up 2.58% on Monday. Similarly, the semiconductor-heavy KLSE Technology Index gained 0.77% or 2.12 points from the start of the week to 37.14 points yesterday, after hitting a one-month low of 35.55 points last Friday.
Gainers on Bursa yesterday were led by semiconductor player Malaysian Pacific Industries Bhd, which jumped 7.77% or RM1.02 to RM14.14, while ACE Market-listed industrial automation manufacturer MMS Ventures Bhd rose 2.26% or four sen to hit its all-time high of RM1.81.
Others on the up included semiconductor players Globetronics Technology Bhd and Inari Amertron Bhd, vision inspection systems producer Vitrox Corp Bhd, and software developer MLabs Systems Bhd.
However, the rise was not across the board. Decliners included information technology-related companies Mesiniaga Bhd and Theta Edge Bhd, micro-electronic components developer JHM Consolidation Bhd, as well as Elsoft Research Bhd which provides automated test equipment solutions for electronics manufacturers.
Hong Leong Investment Bank Bhd research analyst Low Ley Yee told The Edge Financial Daily that tech counters will still deliver “very strong uptrend” despite last week’s hiccup as bargain hunting persists. “We still expect some recovery from oversold counters such as JHM. Investors are also on the lookout for the quarterly results in August,” said Low.
Investors would be expecting better results then, particularly from semiconductor-related companies. MIDF Research analyst Foo Chuan Long said in a note last Monday that global semiconductor sales (GSS) have been growing at over 20% year-on-year (y-o-y) for three consecutive months since April 2017. In June, sales were up 23.7% y-o-y to US$32.6 billion (RM140.18 billion).
“Inclusive of this, GSS have been growing on a y-o-y basis for the past 11 months since August 2016,” said Foo, adding that the healthy increase for this year was partly driven by lower volume order in the first half of 2016, caused by elevated inventory levels and a strong US dollar in some regions.
For the longer term, Foo said GSS will continue to record positive growth, with China — the main export destination for Malaysian semiconductor products — continuing to drive sales volume in the “foreseeable term” on support by the Chinese government for its own semiconductor industry.
As such, Foo told The Edge Financial Daily that he expects the rebound in share price will only be significant among semiconductor and automotive-related players. “Component manufacturers will take the cue from the US tech sector. System and software developers will not really be affected.”
Meanwhile, Low has a positive view on the wider technology sector. “Generally speaking, we anticipate the KLSE Tech Index to breach 38 points this year. The recovery uptrend in the broader market is still very strong.”