KUALA LUMPUR, July 3 — AmInvestment Bank Bhd (AmBank) has upgraded its outlook on the technology sector to “overweight” from “neutral” for the second half of 2020 (2H 2020), as the sector’s outlook remains resilient despite the COVID-19 pandemic impact.
The bank said as the automotive and industrial segments had been hit harder by COVID-19, it expected the focus to be on the telecommunications segment with the 5G growth upswing, and growth in smart sensors with applications in the telecommunications and automotive segments.
“The focus would also be on the adoption of Industry 4.0 technologies such as artificial intelligence, Internet of Things (IoT) and automation to rapidly increase production when economies recover,” it said in a research note today.
AmBank noted that the COVID-19 impact on companies’ earnings already factored in 1H 2020, as majority of orders impacted in 1H 2020 saw deferments and not cancellations, with expectations of a recovery in orders in 2H 2020.
Apart from that, it said limited production under lockdowns had also normalised following easing of the Movement Control Order (MCO) (when the Conditional MCO took place on May 4, 2020).
However, the bank anticipated lower demand for automotive semiconductors after S&P Global Ratings lowered its forecasts for global vehicle sales to fall by nearly 15 per cent to less than 80 million units in 2020 versus 90.3 million units in 2019 due to the impact of the pandemic.
“We believe that a recovery in the automotive segment will be supported by demand for electric vehicles as government incentives, for instance, purchase subsidies in China, and carbon dioxide emission standards announced in the European Union will help stimulate the automotive market,” it said.