PETALING JAYA: With the technology sector having been through a recent re-rating, most analysts are advocating a mixed strategy which involves partial profit- taking and maintaining core exposure to strong tech counters.
Malaysia’s tech sector is entering the early-to-mid phase of a broader upcycle, with first-quarter 2026 results confirming an inflection in book-to-bill ratios and order book visibility ahead of earnings delivery, said Hong Leong Investment Bank (HLIB) Research.
The research house added that the tech sector has re-rated sharply, particularly since April, with the tech index up 30% year-to-date and individual tech names delivering gains of 7% to 123%.
As a result, forward price earnings multiples across the sector have moved towards the upper end of their historical ranges, with many names now trading at or above the 75th percentile of their respective five-year valuation bands, it said in a report.
However, the research house said earnings revisions still have upside, with consensus revisions over the past six months remaining relatively modest for 2027.
Maintaining an “overweight” stance on the sector, HLIB Research said it remains positive on the tech sector, going into the second half of this year (2H26).
However, the research house expects greater volatility as investors look past the strong re-rating and put greater emphasis on earnings delivery.
“Externally, the global backdrop remains robust, underpinned by sustained artificial intelligence (AI) infrastructure spending from the US hyperscalers and sizeable fundraising across the broader AI ecosystem,” the research house noted.
That said, it warned that the key macro risk to monitor is a resurgence of inflationary pressures in the United States.
Any shift towards a more hawkish US Federal Reserve (Fed) stance could tighten financial conditions, potentially affecting both the pace of hyperscaler investment and broader risk appetite towards global technology equities, it said.
“While we do not view this as our base case, it remains an important external variable for the sector in 2H26.”
A senior tech analyst told StarBiz that while she remains generally positive on the sector, there were some compelling reasons to take some profit off the table.
“The AI trade has already driven a strong re-rating and several tech companies have benefitted from the enthusiasm around AI servers, semiconductors and data centre investments.
“Historically, when expectations get overtly high, even excellent earnings can disappoint investors,” she said.
On the flip side, she noted that Malaysia continues to attract data centre and semiconductor-related investments, supported by multinational expansion and supply- chain diversification.
“These are multi-year themes, rather than just one-quarter stories.”
Kenanga Research said it remains “constructive” on the tech sector’s medium-to-longer term outlook, underpinned by resilient AI infrastructure spending and continued global fab expansion.
It noted that after the sharp rally in the tech index, it believes short-term mean- reversion risk has increased, especially amid higher bond yields, potential liquidity absorption from mega tech initial public offerings, the Fed policy uncertainty and stronger US labour data, which could dampen hopes of near-term rate cuts.
Kenanga Research said it advocates partial profit-taking on trading positions after the recent sharp rally, while maintaining core exposure to fundamentally strong technology names.
This is not a call to exit the sector, but a recommendation to manage near-term risk more actively as valuation sensitivity rises, it said.
“We recommend using both fundamentals (valuation bands, five-year standard deviation levels) and technical analysis (Fibonacci retracement zones and key moving averages) to identify potential support levels and re-entry points.”
This framework provides investors with clearer reference points, should a sector pullback materialise, while preserving exposure to the longer-term AI and semiconductor growth cycle, it added.
Malaysian tech stocks yesterday sank in line with the sell-off in regional markets.
