Steady earnings for tech counters in coming years despite hiccups

The sector may be facing a slowdown now after demand has slowly subsided post-Covid, analysts say 

by ASILA JALIL / pic by TMR

TECHNOLOGY counters are poised to make steady earnings at least in the next three to five years despite minor hiccups now in the immediate term, as giants like Apple Inc warn of a slowdown. 

The led from Apple and the emergence of the new Covid-19 variant, Omicron, last week sent the selector down with the local tech benchmark falling to 95.92 points at close last week from 101.27 points in the week earlier as the Nasdaq edged lower to 15,085 points last Friday after hitting a historic high of 16,212 points the week prior. 

Analysts said the sector may be facing a slowdown now after demand has slowly subsided post-Covid. 

“There is very likely to be minor hiccups for now. Also, the digitalisation effort was done on demand spiked during Covid-19 environment. Perhaps that is causing a slowdown. 

“Other factors such as chip shortages might be causing the delays in production too. Technology sector should be having steady earnings visibility at least for the next three to five years,” an analyst who requested anonymity told The Malaysian Reserve (TMR) yesterday. 

Areca Capital Sdn Bhd CEO Danny Wong said some of the local tech stocks are trading at high valuations in anticipation of rapid growth over the next two to three years. 

He also said that they would be subject to correction due to bearish factors such as news on the Omicron variant. 

“However, the mid-term prospects are still there as global demand continues to be strong, of course not all the players but those good ones will do very well next year and beyond. 

“I remain positive in this sector and the correction presents an opportunity for us to pick the right ones,” he told TMR. 

Share price of companies like Inari Amertron Bhd saw a sharp correction last week falling from a high of RM4.23 to hit a low of RM3.71 on the news from Apple while electronics manufacturing service (EMS) players like ATA IMS Bhd have seen its share price collapse after client Dyson Ltd cancelled contract awards due to allegation of labour abuse. 

Investors also sold shares of EMS peers like VS Industry Bhd and SKP Resources Bhd while the mobility tech player Genetec Technology Bhd’s share price has fallen from its high of RM50 in early November to close the week at RM37.60. 

Despite the weaker share performance of the sector stocks, Rakuten Trade Research VP Thong Pak Leng opined counters are not facing a slowdown. 

“I think the weak performance on Bursa Malaysia is because most fund managers who bought at low levels are taking profits,” he said. 

According to news reports last week, Apple stated that it is now faced with slow demand for its product as it saw weakened demand for the latest iPhone 13 line-up. 

The tech giant had cut the production goal for iPhone 13 this year by 10 million units, from a target of 90 million due to a lack of parts. 

News reports stated that Apple may have contributed to the slight downturn in several tech stocks. 


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