Tech stocks regain attention as gloves slump

Tech stocks regain attention as gloves slump
-A +A

KUALA LUMPUR (Aug 17): Technology stocks today rebounded from their August lows seen last Friday, due to thematic play away from glove makers and as investors digested the postponement of the US-China trade deal review. 

Gainers were led by Bursa Malaysia’s fifth-biggest gainer Pentamaster Corp Bhd (up 34 sen to RM4.44), Vitrox Corp Bhd (up 14 sen to RM11.84) and Notion VTec Bhd (up 12 sen to RM1.18) 

At the time of writing, the Bursa Malaysia Technology Index was up 1.58% at 52.57, after a series of sell-off from its record high of 56.53 on Aug 6. 

Pentamaster shares rose today, amid mixed analyst reviews over its second quarter results released last Friday, where net profit fell 13% to RM17 million on the back of a 14.6% decline in revenue to RM103.02 million due to weaker telecommunications segment.

“The sector is still fluctuating sideways,” said an analyst from a local investment bank covering the segment. 

“Yes, guidance for 2H20 is good and the fundamentals are intact. I think the sell-off in gloves may have excited tech in some way as there is nowhere else to invest from an earnings perspective,” the analyst said.

Bursa’s Technology Index has already rallied over 38% year-to-date, being the second sector that has booked gains this year after the healthcare sector’s rubber glove mania.

Last week, glovemakers’ shares experienced their worst week this year following renewed Covid-19 vaccine hopes in the US and Russia, as well as news of contra trading ban for one broker starting today. 

Shares of the four biggest glovemakers fell between 9% and 13.2% today before they staged a recovery. But they remain in the red as profit-taking activities have resumed. 

On the flip side, tech counters may seek to test their recent record highs. Analysts have increased the pegging of tech companies’ valuation multiples as well as earnings forecasts, with resilient electronic device sales recorded among the biggest companies in the business.

Some are more upbeat on the prospects of companies serving the front-end of the technology supply chain.

The highly global-centric supply chain is directly affected by negotiations between the US and China. The two biggest world economies postponed their January 2020 trade deal review on Saturday, citing scheduling conflicts and the need to allow time for more Chinese purchases of American exports, Reuters reported.