Tuesday, October 4, 2011

RHB Research keeps Underweight call on semicon sector

KUALA LUMPUR: RHB Research Institute is maintaining its Underweight call on the semiconductor sector due to the weak outlook and continued downside risks.

It said on Tuesday, Oct 4 the near-term outlook for the sector remains depressed, and partly reflects the negative guidance by the likes of Spansion and STMicroelectronics.

RHB Research said the latest chip sales numbers do not provide any optimism that the situation has reversed.

It said the August 2011 global chip sales of US$25 billion fell by 2.2% on-year, its second consecutive drop from July 2011's drop of 1.1% on-year.

'Similarly, we see the same gloomy picture for equipment orders which for August, declined 34.8% on-year to US$1,184.6 million, the fourth consecutive month of declining orders as chip players cut back on capacity expansion on the back of weak outlook for the chip industry.

'We are fearful that the seasonal pick-up at year end will not materialise, and in the face of a possible 'double dip' recession, a recovery may not emerge until the latter part of 2012. This suggests that quarterly earnings ahead for the industry could continue to surprise on the downside,' it said.

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