Technology stock selldown persists as product demand wanes

TheEdge Wed, Oct 12, 2022 10:58am - 1 year View Original


KUALA LUMPUR (Oct 12): Selling of shares in technology stocks persisted on Wednesday morning (Oct 12), in line with the tepid broader market.

At the time of writing, the FBM KLCI was down 6.26 points to 1,380.56.

Among technology-linked stocks on Bursa Malaysia, Inari Amertron Bhd had fallen 2.83% or seven sen to RM2.40, Dagang NeXchange Bhd dipped 1.29% or one sen to 76.5 sen, AwanBiru Technology Bhd was down 3.03% or 1.5 sen to 48 sen, and Revenue Group Bhd shed 1.09% or one sen to 91 sen.

Elsewhere, UWC Bhd lost 5.58% or 22 sen to RM3.72, Pentamaster Corp Bhd fell 4.56% or 18 sen to RM3.77, and Datasonic Group Bhd shed 2% or one sen to 49 sen.

RHB Investment Bank Research has downgraded the technology sector to “neutral” from "overweight", as it factored in weakening demand for the semiconductor sector, which is likely to persist, notwithstanding gains from a strengthening US dollar and growth in certain sub-segments.

In a sector update on Wednesday, the research house said the US Federal Reserve’s extended hawkish pivot will continue to dampen sentiments on equity valuation as a whole, more so for high-growth sectors like technology.

“Key events that may alter our view include a demand surge post China’s reopening, softening of inflation, and a further slowdown in demand amid recession fears,” it said.

RHB advised investors to seek names with exposure to front-end players, as the outlook remains solid, benefiting engineering support services players.

It said orders for chips related to automotive, server, and high-performance computing remain solid, benefiting players that focus on these sub-segments, as weaknesses are prevalent in consumer products, smartphones, and Internet of Things devices, where an inventory correction is taking place.

Top picks

RHB’s top picks are:

  • Malaysian Pacific Industries Bhd, with exposure to the automotive industry (and electric vehicles), capacity expansion, and adoption of new advance packaging technology;
  • CTOS Digital Bhd, with a domestic focused profile, leading position and prospects mirroring growing demand for various digital solutions and analytical insights;
  • Small-cap Coraza Integrated Technology Bhd, which would benefit from robust orders and exposure to front-end equipment players.

Read also:
Global PC shipments fell 19.5% in third quarter of 2022, says Gartner

Intel plans to cut thousands of jobs in face of PC slowdown

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