CFA Society Singapore
SINGAPORE (Mar 19): RHB Research is sticking to its bottom-up approach in the tech sector, focusing on key selection of stocks which have sound fundamentals and balance sheet as well as good growth despite the ongoing trade war issues.
This means RHB tries to identify the laggards -- those which have not yet been rerated or rerated less than its peers -- with the hope that these stocks might rerate when they deliver earnings growth, coupled with further positive news on the US-China trade deal.
“Our Top Picks -- Venture, Fu Yu and Silverlake -- reported positive results and their share prices have also rallied since the start of the year,” says lead analyst Jarick Seet in a Tuesday RHB report, “while we explore new names which we consider laggards like Memtech and Frencken.”
Since US President Donald Trump initiated the possibility of a trade war against China and its other key deficit trading partners in Mar 2018, Singapore stocks, especially those in the manufacturing sector, have taken a significant hit.
However, since end Jan, there has been positive news on this front coming out from both parties as they have met and held talks during 1Q19. Both parties have also expressed optimism towards a trade deal in front of the media, which improved market sentiment generally, mostly tech stocks, as the market seems to be positioning for a trade deal by end Mar.
Says Seet, “We do note that not all technology share prices have rallied – some have even derailed due to negative earnings, or a slowdown due to loss of projects, or cut in orders by their customers, like Sunningdale Tech and Valuetronics.”
In addition, the semiconductor sector remains weak across the whole supply chain, with orders still recovering at a slow pace.