KLTEC Experiences Short-Term Headwinds Amid Optimistic Semiconductor Recovery

The Bursa Malaysia Technology Index (KLTEC) has lost its year-to-date gains due to short-term challenges, despite medium-term recovery prospects. RHB’s report suggests that investors should consider building positions during price corrections as a new semiconductor upcycle begins.

“Still, we advocate investors with a medium-term view to be nimble and build positions amid steep share price corrections to attractive levels. The new semiconductor upcycle has only just begun,” said RHB in its Malaysia Sector Update Report.

KLTEC headwinds

The second quarter of 2024 (2Q24) results for the sector were largely a miss, mainly on slower-than-expected revenue and margin compression and high expectations. 

“We believe the primary earnings drivers are volume loading and margins compression stemming from negative FX movements that can be passed on to customers via renegotiation, revised quotation, and engineering, and process efficiency,” said RHB.

The Semiconductor Industry Association forecasts growth to USD611.2 billion in 2024, driven by AI-related demand.

While Q2 2024 results were underwhelming, RHB expects sustained growth into FY25, though unfavorable foreign exchange rates may impact earnings. Overall, the semiconductor sector is projected to recover significantly by 2025.​

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