KUALA LUMPUR: Malaysian technology stocks returned to the spotlight on Wednesday as investors latched onto fresh optimism that proposed United States restrictions on Chinese optical transceivers could benefit local manufacturers.
The rally extended gains from last Friday, when Bursa Malaysia's technology sector tracked a powerful overnight surge in Wall Street technology stocks led by Microsoft.
By the midday break, the Bursa Malaysia Technology Index had climbed 2.91 per cent to 77.83, its highest level since July 18, 2024. It was the best-performing sectoral index, while the FTSE Bursa Malaysia KLCI rose 0.93 per cent to 1,748.84.
Technology and technology-linked counters dominated the exchange's most active list, led by NationGate Holdings Bhd, Inari Amertron Bhd, Zetrix AI Bhd, VS Industry Bhd and SNS Network Technology Bhd.
NationGate and VS Industry, both electronics manufacturing services providers, gained on expectations that any shift in production away from China could create opportunities for manufacturers in Malaysia.
NationGate, the market's most actively traded stock, rose 6.2 per cent to RM1.37. VS Industry, the fourth most active counter, added 4.35 per cent to 24 sen. Both are components of Bursa Malaysia Industrial Products and Services Index.
Among technology counters, Inari climbed to its highest level in more than eight months after nearly 40 million shares changed hands. The stock rose as much as 9.1 per cent before easing to RM2.39, giving the company a market capitalisation of RM8.4 billion.
Zetrix AI, formerly MyEG Services Bhd, bucked the broader rally, slipping 2.04 per cent to 72 sen. It was the third most actively traded stock on Bursa Malaysia.
SNS Network, an information and communications technology solutions provider, was Bursa Malaysia's fifth most actively traded counter. It closed the morning session unchanged at 55.5 sen after touching a six-month high of 58 sen earlier in the day.
The renewed interest in technology stocks came as global investors rotated back into artificial intelligence (AI)-linked plays.
Strong earnings and upbeat outlooks from Microsoft, Amazon and data analytics firm Palantir eased concerns over heavy AI spending and the timeline for returns, AFP reported.
Meanwhile, news reports said the US government is working on measures to block imports of new Chinese optical transceivers, which are used to transmit data through fibre-optic cables in data centres.
The proposed restrictions have fuelled expectations that production could increasingly shift to manufacturers outside China, potentially benefiting companies across Malaysia's semiconductor and electronics supply chain.
Following this, China's CSI300 Telecommunication Services Index fell six per cent in early trade, while export-oriented optical component makers Zhongji Innolight, Eoptolink Technology and Suzhou TFC Optical Communications all opened sharply lower.
Zhongji Innolight, which derived 62 per cent of its first-quarter revenue from the US market, fell about eight per cent in both Shanghai and Hong Kong trading, Reuters reported.
Back home, Hong Leong Investment Bank Bhd (HLIB) said Malaysian technology companies with exposure to the optical transceiver supply chain could emerge as beneficiaries as geopolitical tensions accelerate the shift of manufacturing away from China.
The research house said the US' proposed restrictions on new Chinese-made optical transceiver models could reinforce the "China+1" strategy, prompting more production to move to Southeast Asia, Taiwan and the US.
Chinese manufacturers account for more than half of global optical transceiver supply. However, global players such as Coherent and Lumentum have already established manufacturing operations and are expanding capacity in Southeast Asia, HLIB said.