Monday, October 3, 2011

Tech-related stocks retreat on weaker outlook

KUALA LUMPUR: TECHNOLOGY [] and semiconductor-related stocks retreated on Monday, Oct 3 after MIDF Research downgraded the sector from positive to neutral, citing weakening global economic conditions that was affecting consumer confidence.

At 11.27am, Unisem fell 2.5sen to 99.5 sen, MPI down 1 sen to RM3, JCY 1.5 sen to 40 sen, Globetronics 2.5 sen to 90 sen, KESM 1 sen to RM1.80, Green Packet 1 sen to 57 sen, Eng Teknologi 4 sen to RM2.02 while Kobay fell 8 sen to 66 sen.

In a note Oct 3, MIDF Research said that global semiconductor sales showed a sequential year loss of 1.1% to US$24.9 billion in July 2011 for the first time after 20 consecutive month of growth.

It said that the weakening consumer confidence would put pressure on demand, adding that it expects the weak demand to continue in 4Q FY11 due to the possibility of consumer electronics manufacturer scaling back its production in anticipation of slow demand next year.

"Looking back at Oct 2008, the global sales fell 2.3% year-on-year (y-o-y) after an extended period of growth. This was followed by 12 consecutive months of contractions," it said

However, it said July's global semiconductor sales were "steady" with only 0.1% loss.

For specific stocks pick, the research house said it was currently reviewing its calls for both Unisem and Globetronics, with a strong possibility of downward bias.

It said other barometers showed a possible slack in global demand, with the Book-to-Bill (BTB) ratio recorded bookings falling 8.8% month over month (m-o-m) and 34.8% y-o-y, while billings figure were down 3% m-o-m and 5% y-o-y compared to July 2011 and August 2010 respectively.

"It appears that the BTB ratio is trending downwards as weaker dynamic random access memory (DRAM) demand, foundry spending reductions and near-term uncertainties about electronics demand were reflected in declining sales trends for new semiconductor manufacturing equipment," it said.

In addition, it said HSBC's China Flash PMI showed the Chinese factory sector contracted for the third consecutive month in Sep 2011 as both new orders and new export orders fell.

"The flash PMI, which is a preview of China's factory output before official data, hovered below the 50-point mark for the third straight month in Sep 2011, registering 49.4, down from 49.9 in Aug 2011," it said

However, a PMI reading of 48 in China might still register a 12% to 13% annual growth in industrial output, which might moderate the slowdown as China's domestic demand may be sufficient to provide support, it said.


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