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Author: SGX   |   Latest post: Mon, 8 Aug 2022, 5:04 PM

 

Regional Tech Stocks Post Highest Weekly Gain in Eight Months

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  • Last week APAC technology stocks posted their strongest gains in close to 40 weeks, with the top quartile of these stocks by market value averaging 4% gains, led by China Semiconductor Manufacturing plays. Like their global peers, regional technology stocks are on average trading at a 20%-25% discount to their end-2021 earnings multiples.
  • AEM, UMS, Frencken, ISDN and GVT all generated relatively synchronised gains last week averaging a 4.4% gain over the five sessions, reducing their average YTD decline in total return to -24.8%. Since the end of 2019, the five stocks together with STI constituent, Venture, have averaged total returns in in the vicinity of 100%.
  • The 1Q22 Singapore GDP report noted that electronics cluster is expected to expand more strongly than earlier projected, bolstered by robust global demand for semiconductors from the 5G and automotive markets, as well as cloud services and data centres.

 

With 20% index representation, technology is the largest sector of the FTSE Asia Pacific Index. The technology sector was a key driver of the regional gains last week, as Asia Pacific’s technology stocks lodged their strongest performance in 39 weeks. The preceding week (ending May 27) had seen technology stocks lead the US stock market, with Asia Pacific technology stocks catch-up in the week ending June 3. Over the past fortnight, the Philadelphia Semiconductor Index (SOX), a barometer for global semiconductor industry, has recovered 6%, which saw industries such as electronic components, semi-conductor and internet stocks among the stronger performing global industries for the 10 sessions. Note the SOX Index remains down 20% in the 2022 year to 3 June, yet up 75% since the end of 2019. The technology sector declines of the past 22 weeks have also positioned global and regional technology stocks to be trading at a 20% to 25% discount to their earnings multiple at the end of 2021.

In Singapore, the more semiconductor-related stocks of AEM Holdings, UMS Holdings, Frencken Group, ISDN Holdings and Grand Venture Technology averaged 4.4% gains last week, while the STI was comparatively flat. This saw the 10 most traded technology-related stocks in Singapore average 3.8% gains last week, while booking a combined S$32 million of net institutional inflows. Across the Singapore stock market, Venture Corporation saw the second highest net institutional inflows for the week, after manufacturer Singapore Technologies Engineering. The comparative performances and recent flows are tabled below.

 

Most Traded Tech-related stocks

Code

Mkt Cap S$M

YTD Average Daily T/O (S$M)

Week ending 3 June Total Return %

Week ending 3 June Net Insti Flow S$M

YTD Total Return %

YTD Net Insti Flow S$M

2021 Total Return %

2020 Total Return %

Venture

V03

5,186

19.9

2.2

23.1

0.2

-83.8

-2

25

AEM SGD

AWX

1,409

12.0

5.1

4.6

-12.3

-47.9

55

75

UMS

558

793

9.0

3.5

1.0

-20.4

-54.8

81

10

Frencken

E28

504

6.5

4.4

1.0

-38.3

-49.0

52

47

Nanofilm

MZH

1,776

5.5

12.5

1.8

-29.0

-56.1

-13

N/A

IFAST

AIY

1,401

4.9

1.9

-0.2

-42.8

-67.9

182

195

ISDN

I07

248

1.7

2.7

0.1

-22.1

-4.4

81

79

Aztech Gbl

8AZ

664

1.6

-0.6

-0.1

3.8

-10.3

N/A

N/A

Grand Venture

JLB

278

0.4

6.5

0.1

-30.7

0.9

262

25

Excelpoint

BDF

229

0.4

0.0

0.0

51.8

5.7

192

-2

Average

 

 

 

3.8

 

-14.0

 

99

57

Total

 

12,488

62

 

32

 

-368

 

 

Source: SGX, Bloomberg, Refinitiv (Data as of 3 June 2022)

Sector Developments

With the growth in technology demand in 1H22 built into 2021's rally, the technology sector has been the least performing global stock sector in the 2022 year to 3 June, weighed by supply chain constraints, higher energy costs and outlook for reduced demand growth in 2H22. The past fortnight of sector gains has coincided with continued declines in supply chain container market rates, Brent Crude Oil prices on the move, yet mostly range bound between US$110//bbl and US$125/bbl, and further policy initiatives to support growth in China.

Supply chain container rates as represented by the Freightos Baltic Container (FBX) further declined over the week to 7370, which is one-third lower than the September 2021 high (yet still five times higher than end-2019 levels). Effective supply chain management has been a keen topic within the Singapore technology sector in recent years. UMS Holdings highlighted that last year JEP Holdings provided readily available manufacturing facilities in Singapore to support UMS Holdings’ strong customer order flows, alleviating the production challenges faced in the Group’s Penang campus due to the manpower crunch in Malaysia during the year. In late April, Venture Corporation also noted that several initiatives from its R&D Labs has enabled it to mitigate supply chain disruptions and expand its capabilities to fulfil more orders.  

Looking ahead, the 1Q22 Singapore GDP report noted that electronics cluster is expected to expand more strongly than earlier projected, bolstered by robust global demand for semiconductors from the 5G and automotive markets, as well as cloud services and data centres.  In addition, 1Q22 saw AEM Holdings report a record quarterly revenue of S$262 million, which the electronic-services provider said was the highest in the group’s history, and up from S$80 million a year ago. AEM Holdings said it has raised the group’s revenue guidance for its FY22 to between S$700 million and S$750 million.

While the SEMI World Fab Forecast expects to see the global industry increasing capacity 8% in 2022 (following 7% growth in 2021), much will depend on whether the technology demand super cycle, running since 2016 on innovation, industry 4.0 adoption and widening fields of application, withstands the key challenges in supply chain inventories, higher energy and borrowing costs, in addition to potential declines in consumer products and services.

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Related Stocks

Chart Stock Name Last Change Volume 
AEM 4.44 +0.06 (1.37%) 1,556,900 
UMS 1.23 +0.03 (2.50%) 5,585,600 
Frencken 1.31 +0.06 (4.80%) 7,681,200 
ISDN 0.52 +0.005 (0.97%) 554,200 
Grand Venture 0.71 0.00 (0.00%) 78,300 

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