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UBS Investment Research
Asia Tech Strategy
A nd off they went in a haste
De-risking has accelerated for Asia Tech stocks
Asia IT MSCI has now underperformed the broader Asia MSCI by 7.7% year-todate.
This is now reflecting the unfolding downcycle – vs. an outright downturn –
with the earlier remaining our base case. We therefore continue to recommend
investors to neutralise positions in Tech (we had been negative on the sector
January ’11 till two weeks ago), and expect a better time to buy the sector could
possibly come later in 3Q11, once expectations have re-set further.
Earnings re-set now well underway
Asia Tech earnings are down 14% on average for ‘11E EPS since April. This still
leaves UBS analysts 7% below, but as a team, we were >11% below consensus at
some point. We still see some market downside in several names, notably LGE,
Santyam, Nanya Tech, Quanta, Everlight, SPIL, Delta, ASM PT and Hon Hai.
Value emerging in some of more bombed-out sectors
Several of our Buy-rated stocks are within trough and mid historic PE & P/B
multiples: HTC, Hynix, Infosys, Kinsus, Lenovo, LGD, Lite On Tech, Novatek,
Samsung, TSMC, UMC and ZTE. We see value forming notably in Memory
(1.07x ‘11E P/B ex Nanya Tech) and LCD (0.75x).
Remaining selective for now
We retain an Overweight on Memory Semis (early trough indicators) and
Smartphones (where fundamentals are holding better than current views). Most
Prefs: HTC, Hynix, Kinsus, Lenovo, Samsung and TPK; Least Prefs: Acer, Nanya
Tech, Mediatek, Nanya PCB, Silitech and now Pegatron (replacing ASMPT).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asia Tech Strategy
A nd off they went in a haste
De-risking has accelerated for Asia Tech stocks
Asia IT MSCI has now underperformed the broader Asia MSCI by 7.7% year-todate.
This is now reflecting the unfolding downcycle – vs. an outright downturn –
with the earlier remaining our base case. We therefore continue to recommend
investors to neutralise positions in Tech (we had been negative on the sector
January ’11 till two weeks ago), and expect a better time to buy the sector could
possibly come later in 3Q11, once expectations have re-set further.
Earnings re-set now well underway
Asia Tech earnings are down 14% on average for ‘11E EPS since April. This still
leaves UBS analysts 7% below, but as a team, we were >11% below consensus at
some point. We still see some market downside in several names, notably LGE,
Santyam, Nanya Tech, Quanta, Everlight, SPIL, Delta, ASM PT and Hon Hai.
Value emerging in some of more bombed-out sectors
Several of our Buy-rated stocks are within trough and mid historic PE & P/B
multiples: HTC, Hynix, Infosys, Kinsus, Lenovo, LGD, Lite On Tech, Novatek,
Samsung, TSMC, UMC and ZTE. We see value forming notably in Memory
(1.07x ‘11E P/B ex Nanya Tech) and LCD (0.75x).
Remaining selective for now
We retain an Overweight on Memory Semis (early trough indicators) and
Smartphones (where fundamentals are holding better than current views). Most
Prefs: HTC, Hynix, Kinsus, Lenovo, Samsung and TPK; Least Prefs: Acer, Nanya
Tech, Mediatek, Nanya PCB, Silitech and now Pegatron (replacing ASMPT).
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