Inflation in the United States slowed in April, sparking hopes that the Federal Reserve might cut interest rates this year. This led to a broad rise in U.S. stock markets overnight, hitting new highs, which in turn boosted market sentiment in the Asia-Pacific region. In the Malaysian stock market, despite a decline in glove stocks, tech stocks drove the market higher, successfully pushing the index above 1610 points.

The FTSE Bursa Malaysia KLCI $FBMKLCI 200I.MY$ opened higher at 1604.38 points and continued to rise, breaking through 1610 points. By the mid-day break, it closed at 1611.29 points, up 8.06 points for the half-day session.

Several tech stocks made it onto the gainers' list. Malaysian Pacific Industries $MPI 3867.MY$ surged 3.2%, closing at RM33.50, making it the biggest gainer of the session. Pentamaster Corporation ($PENTA 7160.MY$) rose by 6.1% to RM4.72, ranking ninth on the gainers' list. VSTECS $VSTECS 5162.MY$ increased by 7.5% to RM3.60. Additionally, Dufu Technology $DUFU 7233.MY$ rose 4%, and UWC $UWC 5292.MY$ gained 3%.

Price Charts of Malaysia Tech Stocks

Source: Tradingview

Analyst Insights

TA Securities has maintained its 'overweight' stance on the technology sector, anticipating a gradual improvement in sentiment within Malaysia's semiconductor sector. This optimism is supported by an expected recovery in global demand and increased trade diversion opportunities arising from the 'China Plus One' strategy.

In a sector update on Friday, TA Securities reiterated its 'buy' ratings on Inari Amertron Bhd, with a target price (TP) of RM3.55, and Elsoft Research Bhd, with a TP of 59 sen. Elsoft specializes in providing cost-effective automated test equipment solutions for the semiconductor, optoelectronic, and automation industries.

"For Malaysian Pacific Industries Bhd (MPI), we have reduced our earnings forecasts by 3.4% for the financial year ending June 30, 2024 (FY2024), 18.7% for FY2025, and 23.9% for FY2026, considering a potential slowdown in the sales of electric passenger vehicles in China," the research house stated.

"After revising the earnings forecasts and rolling forward our valuation base year to calendar year 2025 (CY2025), we adjusted our TP from RM32.35 to RM36.20, based on a price-earnings (P/E) multiple of 28 times CY2025 earnings per share. We maintain our 'buy' call on MPI."

Additionally, TA Securities increased the target P/E multiple for Unisem (M) Bhd from 26 times to 28 times, reflecting a brighter outlook for the semiconductor industry. "As a result, we have raised the TP from RM3.56 to RM3.84, based on 28 times CY2025 earnings. We maintain our 'hold' call on the stock," the research house concluded.

Source: The Edge, M+ Global