Global chips are down: AEM, UMS and other Singapore tech stocks join rout
SINGAPORE technology manufacturing stocks sank into the red on Thursday (Oct 13), tracking an overall decline among chipmakers worldwide and in the Asia-Pacific region.
This comes as the industry starts to feel the impact of weaker consumer demand and macroeconomic headwinds. Chipmakers around the world have already begun to trade at significantly lower valuations, and that negative sentiment is spreading to Singapore’s shores.
On the Singapore bourse, AEM , which provides advanced chip testing solutions, was one of the biggest losers. The counter sank to a two-year low on Thursday, falling as much as 14.2 per cent as at 1.21 pm following media reports that Intel, its key customer, is planning job cuts. AEM closed 11.4 per cent or S$0.42 lower at S$3.25.
DBS Group Research also downgraded the stock to “hold” from “buy” and nearly halved its target price to S$3.19 from S$5.88. The research team expects earnings uncertainty for AEM for FY2023, as prolonged weakness from Intel could hit AEM.
Other tech manufacturing stocks are also looking worse for wear, with UMS losing as much as 8.5 per cent during the afternoon trading session before closing 6.8 per cent or S$0.08 lower at S$1.09 on Thursday. Frencken , Aztech Global , Valuetronics and Nanofilm also closed in negative territory.
Although in the red, Venture Corporation declined the least among the tech counters. The mainboard-listed company closed 1.4 per cent or S$0.22 lower at S$16.08.
In a separate research report, Maybank downgraded UMS to “hold” from “buy” following a sharp de-rating of tech peers. The research team also cut its target price on the precision engineering group to S$1.20 from S$1.50. The new target price implies a potential upside of 11.1 per cent from the counter’s 3.21 pm trading price of S$1.08.
“As we have seen in many cycles, downswings in the semiconductor cycle can be swift and deep. We are thus taking a conservative approach and downgrading UMS to hold until clearer signals emerge,” said Maybank analyst Jarick Seet.
He prefers Venture in the Singapore tech space for its “diversification and resilience”. Maybank has a “buy” call and target price of S$19.55 on the stock, implying a potential upside of 21.4 per cent from the counter’s 3.21 pm trading price of S$16.11.
The Straits Times Index (STI), which tracks the performance of the top 30 companies listed on the Singapore Exchange, was also down 1.3 per cent or 39.07 points to 3,044.12 as at 3.48 pm.
The US’s recent introduction of export controls to China for advanced semiconductor equipment is not helping the global selloff. In fact, the export curbs could add another layer of uncertainty and add to poor sentiment, impacting share prices.
On Oct 7, the US announced new export controls aimed at restricting China’s ability to buy and manufacture high-end chips with military applications. The move complicates Beijing’s push to further its own semiconductor industry and develop advanced military systems.
DBS, in an Oct 11 report, said the move could further exacerbate the noticeable slowdown in the global chip industry, which has already seen earnings misses and weak guidance from the likes of large players like Micron, Advanced Micro Devices and Samsung, to name a few.
Taiwanese chipmaker TSMC, on Thursday, cut its annual investment budget by at least 10 per cent, although it reported a quarterly profit surge of 80 per cent on strong sales of its chips used in data centres and electric cars.
The company flagged challenges from rising inflationary costs next year and shaved its capital expenditure for 2022 to around US$36 billion.
