PETALING JAYA: The outlook for the local tech sector is turning brighter following the materialisation of the de-rating led by US interest rate hikes, appealing valuations after rounds of selldowns as a consequence of the de-rating, as well as the tapering off of Federal Reserve hawkishness and China’s “zero-Covid” stringency, says UOB Kay Hian (UOBKH) Research.
The research outfit said the risk-reward trade-off and sector risk-on have improved after selldowns in the past year, coupled with sector cyclicality against the Bursa Malaysia Technology Index (BM Tech Index) suggesting that the index could be on the brink of an upswing again after 12 months of consolidation.
In a research note released yesterday, UOBKH Research analyst Desmond Chong said: “The past 15-year study on the relationship of the BM Tech Index and global semiconductor sales showed that the bottoming of the BM Tech Index happened between the second to seventh month – and on average 4.5 months – after the onset of global semiconductor year-on-year (y-o-y) sales contraction, while we are currently on the third month of y-o-y sales contraction according to data from October.
...