Analysts believe tech stocks are not merely in a cyclical trend, but instead they are on an upward rising secular trajectory
By SHAZNI ONG / Pic By BLOOMBERG
TECH stocks, along with safehaven, hard commodities and digital assets, are among the sectors and markets deemed to be unaffected by Covid-19 so far, market observers and experts observed.
Pheim Asset Management Sdn Bhd CEO and CIO Leong Hoe Kit said domestic counters that have not been adversely affected by the Covid-19 outbreak in China include healthcare, glove industries and tech stocks.
“Names like Top Glove Corp Bhd, Kossan Rubber Industries Bhd and Supermax Corp Bhd come to mind when talking about counters that have benefitted from the coronavirus outbreak.
“However, if you look closer, you will notice tech counters like Greatech Technology Bhd, Pentamaster Corp Bhd and MI Technovation Bhd have also done quite well despite the outbreak,” he told The Malaysian Reserve (TMR) yesterday.
Leong said the reason for the rise in the healthcare and glove counters are obvious as the demand for these products naturally increases given the scare from any serious contagious disease outbreak.
“As for tech stocks, a lot of analysts believe that tech stocks are not merely in a cyclical trend, but instead they are on an upward rising secular trajectory, and I share this view,” he said.
As for non-domestic equity markets, Leong noted markets like the US are much less affected by concerns over the coronavirus outbreak, and in fact, the Dow Jones Industrial Index and the S&P 500 have rebounded and are close to their all-time highs.
“This may be due to the fact that the coronavirus outbreak actually started in Wuhan, China, and as such, the geographical distance of faraway equity markets in the US are much less concerned over the severity of the new virus outbreak,” he said.
Moving forward, Leong opined that the healthcare and glove stocks will continue to outperform, at least in the short term, given the increased global demand in their products.
“I also view tech stocks will continue to ride the secular upward trajectory beyond the current shortterm market volatility,” he said.
His advice to investors as usual is to look for opportunities to buy on the dip and not to put all their investments in the same basket.
Areca Capital Sdn Bhd CEO and ED Danny Wong said the coronavirus outbreak has had the least effect on utilities and household products, as more people opt to stay at home due to the fear of infection.
“The media could benefit as people will be seeking more news and use more telecommunication and technology like the Internet of Things and the Internet. Safehaven assets like the US dollar, hard commodities such as gold, digital assets like bitcoins, as well as lowrisk asset classes, including fixed income, stand out too,” he said.
Rakuten Trade Sdn Bhd VP of research Vincent Lau said the tech sector has remained resilient, while gloves and healthcare-related sectors have seen renewed buying interest.
“Real estate investment trusts (REITs) have continued to be defensive for their yields, (but) with Bank Negara Malaysia’s (BNM) comments that there is room for further rate cuts, (this) should see it (REIT) sustain,” he said.
MIDF Investment Bank Bhd’s banking sector update note on Feb 6 stated that the sector has no direct impact from the novel coronavirus, so far.
“We opine the novel coronavirus does not have a direct impact on the banking sector. Any impact will be indirect and due to the possible disruption to trade and consumer spending patterns.
“This might have an effect on businesses’ asset quality. However, we believe it is too early to be overly concerned as it is still unclear on how long the outbreak will last,” the bank stated. It maintains a ‘Positive’ call on the sector.