Malaysian Tech Stocks are set for a Rebound in 2025, Driven by a Recovering Semiconductor Market

Technology stocks are projected to see improved performance in 2025, fueled by a broader recovery in the global semiconductor market. In 2024, the Bursa Malaysia Technology Index underperformed the benchmark FTSE Bursa Malaysia Kuala Lumpur Index, largely due to a significant decline in the third quarter. However, it ended the year with a modest 3% gain. At midday trading, the technology index had slipped 1.78%. 

CIMB Securities predicts Malaysia's technology sector net profit will grow by an average of 25% between 2025 and 2026. This growth is expected to be driven by investments in artificial intelligence (AI) infrastructure and a rebound in inventory replenishment for non-AI semiconductor applications.

The firm forecasts a 17% compound annual growth rate (CAGR) for the sector's net profit from 2023 to 2026. The outsourced semiconductor assembly and test (OSAT) and electronics manufacturing services (EMS) sectors are anticipated to outperform in the first half of 2025. CIMB maintains an "Overweight" rating on the sector, favoring Malaysian Pacific Industries (MPI), Genetec Technology Bhd, and V.S. Industry Bhd as top picks.

CIMB highlights that Malaysian OSAT and automated test equipment (ATE) companies stand to gain from increased demand for high-speed network interconnects, energy-efficient power chips, and printed circuit board (PCB) testing for AI data centers. Additionally, the Malaysian EMS sector is poised to benefit from the acceleration of supply chain diversification towards ASEAN in 2025.

Key growth drivers for Malaysia's technology sector include rising semiconductor demand, supply chain diversification, new incentives from the National Semiconductor Strategy, and a weaker ringgit. However, potential risks include delays in semiconductor demand recovery, inadequate funding, geopolitical tensions, labor shortages, and a stronger ringgit.