Investors should avoid shares of Asian technology companies on expectations that US orders for personal computers and global mobile-phone demand will decline, according to Credit Suisse First Boston.
"Our bearishness on Asian technology stocks is driven by what we perceive to be downside risk to consensus views on final demand -- particularly PCs and handsets," Stewart Paterson, Manish Nigam and Peggy Chan, Hong Kong-based strategists for Asia excluding Japan at CSFB, wrote in a note to clients dated yesterday.
Revenue growth at technology companies in Taiwan may "all but disappear in the coming six months" as orders from the US drop, the strategists said. No companies were named in the note.
The brokerage reiterated its "underweight" recommendation on the industry, saying it expects US demand for personal computers to slow "significantly" in the second half of this year and remain flat next year.
An "underweight" recommendation indicates the industry will underperform with the revelant benchmark in the coming 12 months.
CSFB did not name a benchmark for comparison.
The Morgan Stanley Capital International Asia-Pacific excluding Japan Information Technology Index, which tracks 72 computer-related stocks, is the worst performer in the MSCI regional benchmark this quarter. Since the end of June, the industry group is down 3.1 percent.
Growth in the number of mobile handsets sold globally may slow to 2.1 percent next year, CSFB estimates, at a time when companies are raising inventories and cutting prices.
Separately, the brokerage's local unit in Tokyo lowered its investment outlook on the nation's electronic components makers, saying that industry growth has peaked.
Tomohiko Miyazaki, an analyst who covers electronic part makers, reduced his view on the industry to "market weight" from "overweight" in a note to clients dated today.
He also lowered his stock ratings to "neutral" from "outperform" on Kyocera Corp, the world's biggest maker of ceramic packaging for semiconductors, Rohm Co, which makes customized processors for consumer electronics, and Hirose Electric Co, which develops and sells electronic equipment.
"Momentum in the high-tech market, including semiconductors and electronic components, reached its peak between April and June," Miyazaki said. "We are entering a downtrend." A "neutral" rating at CSFB indicates the analyst expects a stock's 12-month price movement to be within 10 percentage points of the average of the companies he covers in the sector. A "market weight" outlook indicates the sector will perform in line with the market's benchmark in the coming 12 months.
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