YESTERDAY’s bloodbath of tech stocks which bears semblance to that of their glove counterparts in recent times has given rise to speculation that the tech stock rally may have reached its tail-end.
Such concern is further exacerbated by Nasdaq’s – the US tech stock barometer – steep fall of 2.4% or 310.99 points to 12,609.16.during yesterday’s overnight trading on Wall Street even as the Dow Jones Industrial Average rose 0.97% or 306.14 points to 31,802.44.
Following a spike in bond yields, concerns about equity valuations for both growth-oriented and tech stocks specifically have weighed on the Nasdaq relentlessly over the past three weeks, prompting big tech stocks such as Apple Inc, Nvidia Corp, Tesla Inc and Alphabet Inc (Google’s parent company) to be leading decliners on Nasdaq yesterday.
Tech stocks are particularly sensitive to rising yields because their value rests heavily on future earnings which are discounted more deeply when bond returns go up.
Back home, it can be observed that the benchmark which rallied as much as 25.7 points to 1625.70 yesterday – spurred by gains in economic recovery sectors, namely banking, oil & gas (O&G), telco and gaming stocks – pared off the gains due to persistent sell-off in glove and tech stocks to close 11.70 points higher at 1611.8.
While global oil prices, in particular Brent Crude has already re-tested the US$70/barrel after crashing to below US$20/barrel last April, crude palm oil (CPO) has fared equally well by having surged near its 10-year high of around RM3,963/metric tonne.
Therefore, not only that new choices of potential sectors abound, the tech sector which has been driven by global digital transformation and emergence of 5G technologies as well as the industry 4.0 also has the disadvantage of valuation been on the loftier side which may hinder their near-term growth..
This somehow explains the inching down of the Bursa Malaysia Technology Index to an intraday low of 77 points this morning due to heavy profit-taking activity before buying interest pushed the index to 80.63 at the close of the morning session.
To-recap, the index touched its 17-year record high of 90.86 on Feb 25 which is 281% above a low of 23.81 on March 19 last year – a day after the implementation of the first round of movement control order (MCO 1.0).
Among the tech stocks that make it to the top 10 gainers’ list at the end of today’s morning session are Vitrox Corp Bhd (up 52 sen or 3.56% to RM15.12); Unisem (M) Bhd (up 29 sen or 3.87% to RM7.79) and D&O Green Technologies Bhd (up 25 sen or 7.2% to RM3.72).
While a rebound of tech stocks looks imminent for now, their sustainability moving forward is another question altogether. – March 9, 2021
