KUALA LUMPUR : The pullback in the global tech sector is seen as a healthy retracement after the recent correction in the tech-heavy Nasdaq, as the sector’s fundamentals remain intact.

Following the US Federal Reserve’s more hawkish stance and possible balance sheet reduction, investors have shifted away from technology-heavy growth stocks and toward value-oriented stocks, which are more favourable in a high-interest rate environment, according to MIDF Research.

“However, we believe that once the selling frenzy subsides, growth stocks like Apple, Microsoft, Tesla, and Nvidia will rebound quickly.” Because these large-cap firms are cash-rich, we believe they will be able to refinance their debt at prime rates, as opposed to smaller, more leveraged companies that must grow quickly and struggle to justify their valuations.

“Overall, we believe that the tech blip in this rotation from technology-heavy growth shares to value-oriented companies is only a brief blip before returning to normalcy in the medium and long term,” it wrote in a note on Thursday (Feb 3).

Malaysia’s external commerce would continue to profit from the world economy’s rebound following the Covid-19 pandemic, according to the report.

As a result, MIDF believes that the recent sell-off in the country’s tech stocks was simply an overreaction to fears of a higher-interest rate environment, which is generally unfavourable for growth stocks like tech stocks, rather than expectations of lower global semiconductor sales following two years of robust demand accelerated by the pandemic.

“We believe that the fortunes of [the] Malaysian IT sector are closely linked to global semiconductor demand.” Given the growth of computer chips in our daily lives in personal gadgets like as smartphones, laptops, and wearables to electric vehicles and Internet of things devices, we expect demand to remain stable in the next few of years,” it said.

The research firm kept its “positive” assessment of the IT sector. The coming of 5G technology, rising smartphone sales, the emergence of digital solutions in business, and a growing electric vehicle market, according to the report, will all contribute to the semiconductor industry’s favourable outlook until 2022.

“Given the group’s exposure to expanding radio frequency (RF) contents in 5G smartphone usage and acceptance, Inari Amertron Bhd (buy; target price [TP]: RM4.55) is our top selection for [the] technology sector.”

“We also like MyEG Services Bhd (“buy”; TP: RM1.27) because it continues to make aggressive moves to ride the emergence of the digital solution wave in businesses, such as the automated driving test and training system (e-testing), Covid-19 breathalysers, and travel insurance cross-selling,” MIDF added.

After spectacular numbers, Alphabet is aiming for a valuation of $2 trillion.

BENGALURU (Feb 3): Alphabet Inc, the parent company of Google, moved closer to joining Apple Inc and Microsoft Corp in the US$2 trillion (about RM8.36 trillion) market valuation club on Wednesday (Feb 2), as the search giant’s shares soared more than 8% following a strong quarterly report.

Alphabet’s stock, which was last trading at US$2,960, was on track for its biggest one-day percentage rise in almost two years, assuaging fears about owning Big Tech after a recent sector-wide sell-off.

Alphabet’s stock market value peaked just above US$2 trillion shortly after the market opened, and was last valued at US$1.97 trillion. This includes insiders’ Class B shares, which do not trade on the stock exchange.

The company’s first near to $2 trillion valuation would be a first for the Mountain View, California-based firm.

“The technology sector began 2022 with some of the most significant uncertainties since the dot-com disaster more than two decades ago,” said Russ Mould, an investment director at AJ Bell. “However, with substantial earnings beats, the largest and highest-quality US IT businesses continue to give the answers the market craves.”

Even as regulators around the world scrutinise them over allegations of privacy breaches and antitrust concerns, shares in Wall Street’s most valuable companies have soared in the last two years, driven by Covid-19 pandemic-driven shifts in how people work and learn.

At least 20 brokerages boosted their price targets for Alphabet stock after the firm reported record quarterly sales that exceeded forecasts late Tuesday. The median analyst price target is now US$3,450, up 16% from where it is today.

Alphabet also announced a 20-to-1 stock split, giving stockholders 19 shares for every one they now own.

Companies split stocks in order to entice investors by making them more inexpensive. Some brokerages, such as Robinhood Markets, allow investors to acquire fractional shares, making the strategy less successful.

In 2000, Tesla Inc. and Apple Inc. split their stock to make their shares more enticing to small investors.

“The split will make the shares more accessible to ordinary investors and would likely facilitate inclusion in the Dow Jones Industrial Average (which is still share price-weighted), but it will have no fundamental impact,” said JPMorgan analyst Doug Anmuth.

Meta Platforms, the parent company of Facebook, was last up 1.1 percent after reporting earnings after the bell on Wednesday.

Advanced Micro Devices Inc shares soared over 5% as its results beat Wall Street estimates, adding to the tech stock rally. Nvidia Corp, Qualcomm Inc, and Micron Technology Inc all increased their stock prices.

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