KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Investors seeking opportunities in the artificial intelligence (AI) sector are shifting their focus from Taiwan to South Korea. Asset managers such as Federated Hermes, M&G Investments, and Invesco Asset Management have turned 'underweight' on Taiwanese stocks and 'overweight' on South Korean shares, citing crowded positions and better valuations.
Key Points for Investors:
Shift in Investment Focus:
- Underweight Taiwan: Federated Hermes, M&G Investments, and Invesco Asset Management are reducing their positions in Taiwanese stocks.
- Overweight South Korea: These firms are increasing their exposure to South Korean shares, finding them more attractively valued.
Valuation Comparison:
- TSMC vs. Samsung and SK Hynix: TSMC trades at 20 times forward earnings, while Samsung and SK Hynix trade at 11.4 times and 6.8 times forward earnings, respectively.
- Indices: The Taiex Index trades at nearly 18 times forward earnings, almost twice as expensive as the Kospi Index.
AI Exposure:
- Taiwan: Offers direct AI exposure through TSMC, a key supplier for Nvidia's advanced chips.
- South Korea: SK Hynix supplies high-bandwidth memory (HBM) chips for Nvidia's AI processors. Samsung has also ramped up HBM production.
Fund Flows:
- Taiwan: Foreign funds have net sold US$7.2 billion worth of Taiwanese stocks this month, the highest in two years.
- South Korea: South Korean shares have seen US$1.6 billion of net inflows during the same period.
Market Dynamics:
- TSMC: Long-only funds have reduced positions in TSMC, leading to the lowest foreign ownership since February, according to Morgan Stanley.
- South Korean Stocks: Benefit from memory chip recovery, boosted by AI demand, and strong earnings growth prospects. The "Corporate Value-up Program" also enhances shareholder returns and corporate governance.
Strategic Considerations:
- Tactical Shift: The rotation from Taiwan to South Korea may be tactical, with Taiwanese tech stocks maintaining robust long-term growth prospects.
- Risk Management: Investors are seeking diversification to avoid concentration risk, as Taiwan’s AI sector is heavily dominated by TSMC.
Market Reactions:
- Recent Declines: Despite solid earnings, SK Hynix shares fell the most since November 2022 due to a global tech sell-off, with Samsung also experiencing a decline.
Conclusion:
With Taiwanese tech stocks, particularly TSMC, becoming increasingly crowded and expensive, investors are finding better risk-reward opportunities in South Korean shares. The shift highlights the attractiveness of South Korea’s AI-related stocks, like Samsung and SK Hynix, which offer exposure to similar themes at more appealing valuations. While this rotation may be tactical, it underscores the importance of diversification and valuation in navigating the rapidly evolving AI investment landscape.
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