SEOUL: Bucking all the doom and gloom in the global chip sector, semiconductor stocks have been the biggest drivers behind an outperformance of Asia’s technology sector this year. And for some market participants it isn’t over yet.
That’s because a bottom is forming for the global memory-chip cycle, according to investors including T. Rowe Price Science & Technology Fund, Midas International Asset Management and Eugene Asset Management Co.
The MSCI Asia Pacific Information Technology index is up over 19% this year despite the US-China trade tensions, beating the MSCI Asia Pacific index by 13 percentage points. The gauge for tech stocks has also marked its best quarterly performance relative to broader Asian peers since June 2017, just before third quarter earnings start trickling in.
The world’s biggest chipmaker Samsung Electronics Co., among the biggest contributors to the region’s tech gains this year, will report today, while the largest member in the sector index – Taiwan Semiconductor Manufacturing Co – will announce results later this month.
Other Asian semiconductor names that have performed well this year include Tokyo Electron Ltd, MediaTek Inc and SK Hynix Inc. Analysts have also turned bullish on chipmakers after spot prices for 4GB DRAM chips fell 0.8% in the third quarter, less than the 24% drop in the previous quarter.
Although there is still a chance for DRAM chip prices to fall double-digit in the fourth quarter, inventory will keep declining, reducing supply and “resulting in an upcycle next year, ” said Lee Soon-Hak, analyst at Hanwha Investment & Securities.
Furthermore, rising investment in 5G technology by telecommunication companies will lead to more demand for chips used for servers, Lee added. — Bloomberg
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