AI-driven recovery sees CIMB upgrade Malaysian tech stocks

(Bloomberg) — CIMB Securities upgraded Malaysian technology stocks to overweight from neutral on improved earnings prospects due to growing demand for artificial intelligence.

The sector has “entered a new upswing cycle with valuation reratings likely,” CIMB analyst Mohamed Shahnaz Noor Azam wrote in a report on Thursday. “We expect further upticks in occupancy rates, especially from the second half of 2024 onwards.”

Accelerated supply chain diversification and supportive government policies will also boost earnings, he added.

Mohamed Shahnaz said the sector has room to rise further given that the Bursa Malaysia Technology Index peaked at 57 times 12-month forward earnings during the “last economic recovery.” The index rose for five consecutive months through June, its longest streak since 2021, but is now trading at below 30 times.

CIMB likes semiconductor assembly and testing outsourcers, picking Inari Amertron Bhd. and Malaysian Pacific Industries Bhd. for exposure to the sector.

The technology stock index fell 0.6% on Friday but maintained its upward trend for the week.

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