KUALA LUMPUR (Aug 4): Bursa Malaysia’s Technology index rose the most in percentage terms on Thursday (Aug 4), after the gauge settled 3.03% higher at 67.43 — the highest it has reached since June 10, 2022, when it closed at 67.76 — as Malaysian shares took cue from US Nasdaq's overnight trades.

The tech-laden Nasdaq jumped 2.59% or 319.359 points to close at 12,668.16 points on Wednesday, while the S&P 500 climbed 1.56% or 69.98 points to settle at 4,155.17 points. The Dow Jone Industrial Average rose 1.29% or 416.3 points to 32,812.5 points.

Reuters reported that Wall Street ended sharply higher on Wednesday, amid strong profit forecasts from PayPal and CVS Health Corp, which lifted sentiment and helped drive the Nasdaq to its highest level since early May.

Meanwhile, CNBC reported that the US stocks' rally clawed back losses from earlier in the week, as traders cheered better-than-expected economic data that helped allay recession fears.

“Earnings season continued, giving investors hope that the market can recover and potentially start a new bull market, as opposed to a bear rally. The S&P 500 is up about 14% from its recent intraday low in June, and the Nasdaq is at levels not seen since May,” CNBC added.

Back in Malaysia, the FBM KLCI reversed Wednesday's drop of 4.48 points by closing 17.14 points higher at 1,507.71, up 1.15%.

Bursa's most-active stocks and top gainers lists were dotted by technology index constituents such as IT services provider Dagang NeXchange Bhd (DNeX), and semiconductor-related counters like Malaysian Pacific Industries Bhd (MPI), ViTrox Corp Bhd and Greatech Technology Bhd.

DNeX shares closed seven sen or 8.64% higher at 88 sen, while MPI ended 78 sen or 2.46% higher at RM32.48.

Vitrox rose 35 sen or 4.73% to end at RM7.75, while Greatech gained 29 sen or 7.65% to settle at RM4.08.

Rakuten Trade Sdn Bhd Vice-President of Equity Research Thong Pak Leng said stocks were lifted by improvements in broad market sentiment, both locally and regionally.

Meanwhile, Areca Capital Sdn Bhd Chief Executive Officer Danny Wong told The Edge that the semiconductor stocks are back on investors' radar, partly due to the market's perceived potential peak in inflation data.

Another good news to support the sentiment is newsflow about no price hike by Apple for its upcoming new model, the iPhone 14, which he expects to boost demand for the iPhone and lift those in its supply chain.

As for the impact of the fire drills being conducted by China around Taiwan from Aug 4 to Aug 7, Wong said “so far [there is] no indication of further disruption to the supply chain.”

It was reported that China launched the fire drill in response to US Speaker Nancy Pelosi’s highly controversial trip to Taiwan.

“The news [China holds fire drills around Taiwan] has been priced-in by the market. We can see today, the technology index and stocks continuing the rebound-rally from their lows last month,” said remisier Jeffry Azizi Jaafar.

The Bursa Technology fell to as low as 57.33 on July 13 — its lowest since October 2020.

“The above issue will make the supply chain in the already disrupted situation even worse. But I think Malaysia’s semiconductors will be one of the beneficiaries. As recent history suggests that whenever a trade tensions (between the US and China) occur, the semiconductor space chain ends up getting disrupted, with US companies shifting to source their supplies outside China, including Malaysia. So maybe the same thing will happen this time,” said Jeffry.

DBS senior economist Ma Tienying concurred, saying China’s reactions to Pelosi’s Taiwan visit may cause a moderate and temporary disruption in regional supply chains, as planes and ships will need to reroute during the period of military exercises, which affects not only shipments going in and out of Taiwan, but also those that pass through Taiwan to other parts of the region.

“Another possible outcome is a bout of risk aversion in the financial markets. The extent and duration will depend on how long the military exercises last and how intense they will be,” Ma said in DBS’s economics & strategy note released on Thursday.

Considering the difficulty of sourcing substitutes and the strategic importance of semiconductor supply, Ma believes that the chances of Beijing curbing imports of Taiwan-made semiconductors are low.

Nonetheless, she warned that the rapid weakening of export demands, especially tech sector demand, is a bigger worry in the short term.

“Taiwan’s exports and manufacturing sectors have been facing downward pressures since the second quarter (2Q), due to the US/European economic slowdown, China’s Covid controls, and inventory correction in the tech sector," she said. “The July PMI data released this week suggest that the pace of exports slowdown is quickening in 3Q.”