Technology stocks

Opportunity for investors to buy quality tech stocks

KUALA LUMPUR: Inari Amertron Bhd and Malaysian Pacific Industries Bhd (MPI) is RHB Research’s top choice for the technology sector.

“While we expected value stocks to take the lead in 2022 amid economic recovery and spin plays in an environment of rising rates and persistently high inflation, the sharp depreciation in stocks of growth (technology) at a level not seen since 2019 was a surprise – since the fundamentals of the sector remain solid.

“This presents a great opportunity for investors to buy quality tech stocks, backed by structural growth catalysts, favorable exchange rates and reasonable valuations,” RHB Research said, adding that it maintained its call. “overweight” to the technology sector.

The semiconductor industry is expected to reach a value of US$613.5 billion (RM2.6 trillion), sustaining growth (10.4%) through 2022 – a third consecutive year of growth, according to world semiconductor trade statistics.

Strong Q4 2021 numbers from top 10 foundries expected to continue into H1 2022, driving semiconductor industry growth, albeit supply chain bottlenecks and selling price appreciation medium (ASP) are expected to persist, potentially extending this upward cycle.

RHB Research pointed out that the impact of the Russian-Ukrainian crisis would be limited for now, as Russia is not a major semiconductor producer and represents less than 0.1% of the global semiconductor market. $556 billion (RM 2.3 trillion).

“The sharp correction in the tech index, which is down 24% year-to-date, has sent the sector’s valuation to a better risk-reward level,” he said.

The research house noted that the sector’s current valuation has been reduced to 2019 levels.

Meanwhile, the Nasdaq and SOX indexes are still a bit above 2019 levels, given the robust outlook and bull cycle in the semiconductor sector.

“This current decline presents a great opportunity for investors to position themselves in quality technology names with competitive advantage and structural growth, at reasonable valuations.

“Capacity bottlenecks and strong foundry production will continue to drive growth for outsourced semiconductor assembly and testing players, with continued earnings growth in the first half of this year.

“On a cautious note, pressure on margins from rising material prices, compliance costs and slowing demand would be key points to watch.” a strong US dollar,” RHB Research said.