KUALA LUMPUR (March 8): Technology-related stocks on Bursa Malaysia continued to fall on profit taking today, as the selldown on US technology stocks weighed on sentiment and investors shifted interest to other recovery plays.

Bursa Malaysia’s technology index fell 6.09% to 79.81, with Malaysian Pacific Industries Bhd, ViTrox Corp Bhd and UWC Bhd topping the list of losers.

MPI was the top loser, plunging RM4.52 or 11.47% to RM34.88, followed by ViTrox’s RM1.22 or 7.71% drop to RM14.60, and UWC sinking 68 sen or 11.7% to RM5.13.

Meanwhile, KESM Industries Bhd slid 62 sen or 4.59% to RM12.88, Unisem (M) Bhd lost 59 sen or 7.29% to RM7.50, Penta Master Corp Bhd tumbled 47 sen or 8.22% to RM5.25, and D&O Green Technologies Bhd slipped 41 sen or 10.57% to RM3.47.

Frontken Corp Bhd, VS Industry Bhd, Dufu Technology Bhd, Inari Amertron Bhd, Dufu Technology Corp Bhd, Mi Technovation Bhd, VSTECS Bhd and Uchi Technologies Bhd were also among the top 30 losers.

Other decliners were Frontken, losing 32 sen or 6.41% to RM4.67; VS Industry 31 sen or 10.69% to RM2.59; Dufu Technology 24 sen or 6.78% to RM3.30; Inari Amertron 23 sen or 6.87% to RM3.12; Mi Technovation 23 sen or 5.68% to RM3.82; VSTECS 20 sen or 7.69% to RM2.40; Uchi Technologies 20 sen or 5.97% to RM3.15.

Phillip Capital Management Sdn Bhd chief strategist Phua Lee Kerk told theedgemarkets.com that the correction in the tech-related counters today was due to the fall in US technology shares, and also investors switching out from technology stocks to recovery plays such as consumer and services related sectors, as the economy recovery gained momentum.

“If you have made enough money (from the tech sector), you know that the upside is not that high; while the rest of recovery plays have more upside potential, essentially, you will take profit from the technology sector, then go into the recovery play,” he said.

Phua said sectors such as gloves and technology have enjoyed a good run amid the Covid-19 pandemic, as the market had priced in strong future earnings.

“The demand for technology products is still there, but it may not be as strong as in the past. The problem is also that the market has already factored in the next two to three years earnings growth in the technology sector,” he said while foreseeing the weakness of the technology sector to continue in near term.

Fortress Capital Asset Management chief executive officer Thomas Yong also reckoned that technology counters have performed well over the past year, driven partly by global digital transformation and emergence of 5G technologies, as well as the industry 4.0.

“Structurally, there are still a lot of room to grow and poised to benefit from these trends.

“However, technology counters' valuation has been on a high side, coupled with expectations of long term yields in the US, it will hamper the growth that the Malaysia technology counters are also relying on big names in the US, and these US guys are also being discounted at increasing discount rate that resulted in lower intrinsic value, as future cash flows are discounted back,” he told theedgemarkets.com.

Fortunately, he said, the 30-year US Treasury yield is reaching a support level which may slow down the sell off in the growth equities names.

“In Malaysia particularly, the retail participation has temporarily rotated to sectors like steel, banks, construction, gaming, etc.

“However, I think the valuation currently is getting more attractive and I expect limited downside risk from current valuation levels, allowing investors to invest in technology equities with growth at reasonable prices,” he said.

Meanwhile, Areca Capital Sdn Bhd chief executive officer (CEO) Danny Wong noted that the sharp fall in technology shares in the US market and return of investor interest in cyclical and rotational plays have weighed the market sentiment of Malaysia’s technology sector.

“I still believe it is a healthy correction. Having a good run in the past six months, it is a time to take a break and reach another level again, typically after the results season,” he told theedgemarkets.com.

While anticipating some profit taking activities, he still sees the technology sector as a long-term play.

“Technology sector will be a high growth area where demand will continue to excess the supply. I think the sector’s valuation is still not expensive, if you look at its potential growth in future,” he added.

Rakuten Trade’s research head Kenny Yee agreed that the drop in technology counters today could be due to profit taking and a shift in investor interest to oil and gas (O&G) stocks and other laggards.

He opined that technology counters will remain in a downtrend over the short term.