Faced with the recent market turmoil, investment bank Credit Suisse said yesterday investors should consider buying stocks that offer incremental revenue growth or stronger pricing power, such as South Korean chipmaker Samsung Electronics Co and Taiwanese flat-panel supplier AU Optronics Corp (友達光電).
Credit Suisse retained its “underweight” rating on Asian technology as the global economic slowdown has hurt demand, but said investors should consider quality technology stocks.
Credit Suisse Asia tech strategist Lim Keng Hock (林慶學) told a press briefing that many of the negative factors had already been factored into share prices and now would be a good time to keep an eye on stocks that offer value.
"The best strategy is sticking to industry leaders now," Lim said.
Credit Suisse analysts recommend sticking to defensive havens from local stock market such as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), Hon Hai Precision Industry Co (鴻海精密), Mediatek Inc (聯發科), HTC Corp (宏達電), Acer and Delta Electronics Inc (台達電).
Credit Suisse likes company stocks that have new product offerings or enough customers to fuel sales growth next year, as they could minimize the adverse impact from sagging demand if the macroeconomy remains weak, the Singapore-based analyst said.
The top three liquid-crystal-display panel makers — Samsung Electronics, LG Display Co of South Korea and AU Optronics of Taiwan — are some of Credit Suisse’s favored stocks, Lim said.
The LCD industry is in a trough and could benefit from an improving LCD TV market next year, Lim said.
Some stocks’ price-to-book ratios have fallen to all-time lows — including that of AU Optronics — providing a better buying point, he said.
Credit Suisse said that investors should also consider putting some money in South Korean memory chipmaker Hynix Semiconductor Inc and Singaporean contract chipmaker Chartered Semiconductor Manufacturing Ltd as capital spending cuts this year could help their business.
Most Asian tech companies have lowered their capital expenditure to about 8 percent of their annual revenue this year, down substantially from 20 percent during the last downturn in 2000.
Taiwan Semiconductor Manufacturing Co (台積電) may lower its capital spending to below 20 percent next year, putting it at less than US$2.2 billion, Credit Suisse semiconductor analyst Randy Abrams said yesterday.
Credit Suisse suggested investors avoid stocks with weak earnings outlook. LG Electronics Co, local chip designer Richtek Technology Corp (立錡), Indian Infosys, Satyam, Wimpro and local contract notebook computer makers, including Quanta Computer Inc (廣達電腦), and Hong Kong-listed handset maker Foxconn International Holdings Ltd (富士康控股).
For investors looking for mid to long-term investment targets, Jessica Chang (張幸宜) said Taiwan’s handset chip designer MediaTek Inc (聯發科), which ranks No. 3 in the world, would be a good choice given an expanding market share and its technical expertise.
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