KUALA LUMPUR (Jan 31): Malaysian technology stocks were among the top losers in early trade, mirroring weaknesses in overnight Nasdaq ahead of the US Federal Open Market Committee's first rate meeting of the year on Wednesday night.

The Federal Reserve (Fed) is widely expected to keep interest rate at the current elevated level, before starting to lower it in the second half of 2024, which bodes well to fuel bullish sentiment towards growth stocks like those in the tech sector.

At closing bell, outsourced semiconductor assembly and test player Malaysian Pacific Industries Bhd topped Bursa Malaysia’s losers, falling RM1 or 3.57% to RM27, reversing all gains accumulated this month for a market capitalisation of RM5.67 billion.

Also visible among Bursa Malaysia’s top 10 losers were prominent players in the automated test equipment manufacturing sector like ViTrox Corp Bhd and Pentamaster Corp Bhd.

ViTrox fell seven sen or 1% to close at RM6.93, giving it a market capitalisation of RM6.55 billion, while Pentamaster dropped 22 sen or 5.16% to RM4.04, valuing it at RM2.88 billion.

Other decliners in the tech sector include Frontken Corp Bhd, Greatech Technology Bhd, UWC Bhd and Mi Technovation Bhd.

These declines led the Bursa Malaysia Technology Index to drop one point or 1.59% to 61.99 points, versus the benchmark KLCI’s steady performance, which rose 0.23 points or 0.02% to 1,512.98 points.

In a note to investors on Wednesday, Apex Securities Bhd observed that the S&P 500 shed 0.06% while Nasdaq slipped 0.76% on disappointing results from Alphabet and Microsoft.

“Following yesterday’s (Tuesday) pullback, we expect further downside to be prevalent as profit taking sets in store,” said the research house.

“The lower liners are bracing further downside as selected small cap stocks are once again demonstrating signs of volatility. Hence, we advocate investors/traders to exercise cautiousness to avoid excessive exposure towards particular small-cap stocks.

“Globally, we expect the US Federal Reserve to stay put at the upcoming interest rate decision to be announced later tonight,” it added.

SPI Asset Management managing partner Stephen Innes also noted that Asian shares encountered widespread declines by noon, with Chinese markets particularly demonstrating signs of instability following the release of its official factory survey, as measured by the manufacturing purchasing managers’ index (PMI), which rose slightly to 49.2 in January from 49 in December, but remained in the contraction territory below 50.

“The survey indicated that China's manufacturing activity contracted for the fourth consecutive month in January,” he told clients in a note on Wednesday.

“Investor concerns mounted over the perceived lack of substantial stimulus measures from authorities to bolster the economy, contributing to a sense of waning confidence in Asian markets.

“In contrast, the US economy appears to be in a more favourable soft-landing position, with inflation and growth both cooperating. However, the dovish shift in Federal Reserve forecasts made in December has contributed to stock market optimism through aggressive pricing of anticipated rate cuts,” he said.

Innes said investors are eagerly waiting for Fed chair Jerome Powell’s comments at the press conference later on Wednesday, as his comments will provide an insight into whether the Fed believes market expectations have gone too far even as inflation approaches target levels.

“US futures are exhibiting wavering trends as uncertainty looms regarding the Fed's timing and the extent of potential rate cuts.

“Consequently, short-dated Treasury yields have seen an uptick as the market scales back expectations for a rate cut in March and has put a bid under the dollar, which is seldom, if ever, good for international stock markets. So, double trouble looms for global investors,” he said.