KUALA LUMPUR (June 24): The rally in technology stocks is not just happening in the global equities market, but also locally.

A quick check on tech-related counters on Bursa Malaysia shows that most have registered strong double-digit growth in share prices over the last few months.

Among the group with a market cap of RM1 billion and above, UWC Bhd topped the list in terms of percentage increase after its share price surged 231.8% since March 19 to close at RM3.66 today, followed by Greatech Technology Bhd with an increase of 183.3% to settle at RM3.92.

Interestingly, both stocks were only listed in the middle of last year, with UWC joining the Main Market at a market capitalization of RM513.52 million, which has now ballooned to RM2.01 billion. As for Greatech, an ACE Market-entrant, its debut market cap of RM463.24 million has now risen to RM2.45 billion.

The old boys, on the other hand, largely registered lower gains — albeit still strong double-digit growths — except for Pentamaster Corp Bhd, which topped the list with a 103.59% jump since March 19.

The others who saw strong gains are also semiconductor-linked favourites, such as Inari Amertron Bhd, which has grown 57.64% since March 19, Vitrox Corp Bhd (up 29.26%), Unisem (M) Bhd (up 25.79%) and Malaysian Pacific Industries Bhd (23.91%).

As for those under the RM1 billion market cap, more than half of them have doubled their share prices in the last three months.

“Confidence among investors on tech is high now as most sectors are badly impacted by Covid-19,” Phillip Capital Management Sdn Bhd chief investment officer Ang Kok Heng told theedgemarkets.com.

“The tech is the best sector during the economic slowdown,” Ang said, adding valuations have now become expensive and that the premium reflects how there is little choice for optimism among the other sectors following the pandemic outbreak.

UWC, for example, now has a 12-month price-to-earnings (TTM P/E) of 48.03 times, compared with 27.74 times at end-2019. Greatech's valuation now stands at 34.72 times, versus 21.26 times at end-2019.

As to how long the tech rally will last, Ang just said, “only time will tell”.

TA Investment Management chief investment officer Choo Swee Kee, meanwhile, noted that “despite the recovery, some tech stocks are still trading below their pre-Covid-19 levels”.

However, Choo cautioned investors to be selective when investing in tech stocks, while highlighting that the most important factor in picking stocks is still the growth prospects.  

The Bursa Malaysia technology index, which fell to a low of 23.81 points in March, has jumped 73.46% to 41.30 points at market close today.

In terms of valuations, it has a TTM P/E of 33.91 times, based on Bloomberg data, compared with 31.53 times at the start of the year.

But its current valuation is still cheaper than its 10-year moving average P/E of 36.1 times. Its all-time high P/E was 89.01 times, which was recorded on May 20, 2014. And over the last five years, the index’s highest P/E was at 41.38 times, which was recorded on Aug 28, 2018.

While questions remain if the rally will continue in the local market, the FANG (Facebook, Amazon, Netflix, and Alphabet (Google)) stocks on Wall Street are still making headways and charting new highs.