Former investment banker Ian Yoong said the decline of the benchmark index over the last two days is a healthy correction for Malaysia’s tech-related stocks.
PETALING JAYA: The risk-off trade globally has hit investor sentiment on Bursa Malaysia despite markets pricing in the pivot by the US Federal Reserve (Fed) likely to occur in September.
The benchmark FBM KLCI extended its loss from Wednesday, closing another 5.96 points lower yesterday to settle at 1,615.18 points after touching an intra-day low of 1,610.58.
Observers related the dip to effects being felt by the overnight slide in US markets with the S&P 500 and the technology-heavy Nasdaq Composite index seeing respective decline of 3.6% and 2.3%, their worst performing day since the fourth quarter of 2022.
Former investment banker and seasoned investor Ian Yoong said the US selloff has spooked investors in Malaysia.
Focusing his attention on the technology sector, he told StarBiz: “The technology stocks in Malaysia are trading at high valuations to future earnings growth.
“It is difficult to justify investing in technology stocks in Bursa Malaysia which are trading at astronomical valuations of 80 times historical earnings.”
As such, he is of the view the decline of the benchmark index over the last two days is a healthy correction for Malaysia’s tech-related stocks, particularly because the earnings growth of this sector is expected to be ranging between 25% and 35% over the next couple of years.
“The next three years will be very exciting for the technology sector on Bursa Malaysia with the proliferation in data centres and the diversion of technology investments into Malaysia,” Yoong predicted.
On the other hand, he said it is worth noting that the three-year average price-earnings (PE) ratio of the technology sector on Bursa Malaysia is a whopping 51 times, commenting that Bursa’s tech sector has always had a high PE ratio vis-a-vis regional markets.
An investment analyst with a local fund managing firm concurred with Yoong’s thoughts, saying the FBM KLCI’s dip could represent a buying opportunity for investors.
“The selldown overnight yesterday morning was due to Tesla Inc reporting a slowdown in profit for the second straight quarter as it is facing challenges from competitors in sales of electric vehicles, while Google parent Alphabet Inc also saw share prices drop,” he said.
He added the local technology sector is currently being supported by the data centre thematic, and said it would be interesting to see how this phenomenon would improve the country’s adoption of technology as well as artificial intelligence, but more importantly, how it could enhance Malaysia’s employment market.
The FBM KLCI saw 4.55 billion securities worth RM3.12bil changing hands yesterday as losers far outnumbered gainers by 743 to 258, while 673 counters closed unchanged.
