Asia’s best-performing technology stocks are all Taiwanese. That fact should give pause to the economists and analysts who have been writing off the silicon nation in the face of stiff competition and a weakening China.
It also hints at bearishness toward the region’s once-mighty Internet players and renewed optimism over a global gadget business that has been battered by the slowdown in the smartphone market, a perennially laggard PC sector and pessimism about Apple Inc’s growth momentum.
Leading the charge among the MSCI Asia Pacific Information Technology Index’s 111 members are offshoots of two Apple suppliers that are also among Taiwan’s most famous names.
Casetek Holdings Ltd (鎧勝), a supplier of metal casings for Apple devices, is up 29 percent in US dollar terms this year as of Friday last week’s close, outperforming parent Pegatron Corp (和碩), which assembles iPhones and is the region’s ninth-best performer.
Second on the list is Vanguard International Semiconductor Corp (世界先進), a subcontractor for its largest shareholder and Apple chip supplier Taiwan Semiconductor Manufacturing Co (台積電). Vanguard focuses on making specialty chips that are not sexy, but are fundamental to every device, such as display driver and power management chips. It also takes on some overspill orders from its larger partner.
So what do the outperformers have in common? They all manufacture the components that go into electronic devices. None are in the hip new markets of e-commerce, Internet or social media. They do not make software or branded consumer electronics.
Among the top performers are Largan Precision Co (大立光), one of the chief suppliers of camera modules for the iPhone and most other high-end smartphones. A serial outperformer (up 300 percent in the past four years), Largan took a hit last year, but is back to form this year.
Asia’s regional technology index was down 8.5 percent by Friday last week’s close, hurt by declines in the likes of last-year’s top performer NetEase.com Inc, as well as marquee names Baidu Inc (百度), Alibaba Group Holding Ltd (阿里巴巴), Tencent Holdings Ltd (騰訊) and Samsung Electronics Co.
No. 10 on the list is South Korea’s NCSoft Corp, the online game maker that announced a share buyback in December last year. From there, the next handful of names follow the same pattern of supplying bits and pieces for the world’s electronics hardware.
Lest one think this run-up makes these stocks a little pricey, consider that the leading performers are still trading below the index’s average blended forward 12-month price earnings ratio of 15.2.
Casetek and Pegatron are trading at less than 10. Vanguard is the exception, though barely, on a multiple of 16. (NCSoft trades at a higher valuation than the regional index, though it is in line with its gaming peers.)
Component makers might seem dowdy compared with Asia’s Internet hipsters. In the end, though, the world’s love affair with gadgets endures.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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