KUALA LUMPUR (Jan 16): RHB Investmet Bank Research has maintained its “neutral” rating on the technology sector and said it believe the semiconductor market will remain in the doldrums in 1H2023, as inventory correction takes place amid demand uncertainty.

In a note on Monday (Jan 16), the research house said non-semiconductor counters should see relatively brighter prospects given the domestic-focused business and full reopening of borders.

It said sector valuation is rather fair, at its five-year mean, capped by elevated bond yields and quantitative tightening cycle.

Still, derailed earnings remain likely, it said.

RHB IB said overall guidance from chip-related companies is less bullish for the near term, clouded by the worsening macroeconomic outlook and low consumer confidence — a few bright spots lie in vehicle electrification and high-performance computing-related chips.

It said the main challenges are labour and material shortages, demand uncertainties, and geopolitical tensions.

“Still, their solid balance sheets and relatively healthy USD/ringgit (despite our in-house forecasts of the ringgit strengthening) should cushion exporters from the demand slowdown.

“Upside/downside risks: i) strengthening/softening smartphone sales; ii) favourable/unfavourable foreign exchange movements; iii) strong/weak consumer demand; iv) obsolescence of technology; and v) intensifying geopolitical conflicts,” it said.

RHB IB’s top picks are CTOS Digital Bhd and Coraza Integrated Technology Bhd.