KUALA LUMPUR (March 13): TA Securities has maintained “overweight” on the technology sector, saying it expects the sentiment of the semiconductor sector in Malaysia to improve gradually, underpinned by an anticipated recovery in global demand as well as increasing trade diversion opportunities as a result of the China Plus One strategy.

In a sector update on Wednesday, the research house said its top picks are Inari Amertron Bhd and Malaysian Pacific Industries Bhd (MPI).

TA Securities said it remains optimistic about Inari’s (target price (TP):RM3.55) outlook, backed by healthy earnings contribution from its radio frequency segment.

“Besides, we believe the new plant in China will become the next earnings driver once the semiconductor sector in China starts to pick up.

“Meanwhile, we continue to like MPI (TP: RM32.35) due to its strengthening product portfolio and automotive-centric strategy,” it said.

It said the group will continue to focus on China’s fast-growing electric vehicle market, with the target for the automotive segment to contribute over 50% of the group’s revenue over the next few years.

“Meanwhile, we upgraded our recommendation on Elsoft Research Bhd (TP: RM0.59) from Hold to Buy given the stock’s improved risk reward potential following the recent share price weakness.

“On the other hand, we maintain a Hold call on Unisem (M) Bhd (TP: RM3.56),” it said.

TA Securities said key downside risks include: i) heightened geopolitical tensions weighing on economic growth and disrupting supply chains, ii) weaker-than-expected sales and iii) weakening of the US dollar against the ringgit.