PETALING JAYA: Investors will likely become more selective and disciplined after the recent strong rally, says Kenanga Research.
The research house said after the sharp rally in both the PHLX Semiconductor Sector Index and Bursa Malaysia Technology Index, its likely short-term mean-reversion risk has increased.
It added that this was particularly so amid higher bond yields, potential liquidity absorption from mega tech initial public offerings, US Federal Reserve policy uncertainty and stronger US labour data, all of which could dampen hopes of near-term rate cuts.
“Hence, we advocate trimming trading positions and locking in partial gains, while maintaining core exposure to fundamentally strong names.”
The research house said it will remain “neutral” on the sector, continuing to favour Kelington Group Bhd
, UWC Bhd, Frontken Corp Bhd and Infomina Bhd due to stronger order visibility, margin resilience, as well as artificial intelligence (AI) and front-end exposure.
However, Kenanga Research said it will stay cautious on electronics manufacturing services names, given weak end-demand and foreign-exchange sensitivity.
Overall, it remains positive and constructive on the technology sector’s medium-to-longer term outlook, underpinned by resilient AI infrastructure spending and continued global fab expansion.
Meanwhile, the research house said advanced packaging is becoming increasingly important as traditional chip packaging is no longer enough to meet the requirements of modern electronics.
The main purpose of advanced packaging is to place chips closer together, improve data transfer speed, reduce power consumption and allow more functions to be integrated into smaller devices.
The advanced packaging market is expected to grow from around US$54bil in 2025 to US$109bil by 2031, implying a 14% compound annual growth rate.
“This growth is underpinned by rising semiconductor content across AI, high performance computing, automotive, mobile, networking and consumer electronics.
“Growth is not only volume-driven, but value-driven, as packages become more complex and command higher value per unit,” Kenanga Research said.
For Malaysia, the read-through is positive but selective, as the established outsourced semiconductor assembly and test (Osat) and semiconductor support ecosystem provides a strong base.
Osat names such as Inari Amertron Bhd, Malaysian Pacific Industries Bhd and Unisem (M) Bhd are more direct proxies.
“The bigger opportunity lies in moving beyond conventional assembly and test into higher-value areas such as advanced test, precision automation, photonics packaging, process infrastructure and chiplet- related design support.”
It noted that automation and test equipment players could be among the clearer beneficiaries, such as Pentamaster Corp Bhd, Vitrox Corp Bhd and Aemulus Holdings Bhd.
