KUALA LUMPUR (Oct 15): The Malaysian technology sector enters its third quarter of 2025 (3Q2025) earnings season poised to deliver a decent set of results, buoyed by seasonal strength and the continued absence of new chip tariffs.
However, this optimism is tempered by strict scrutiny, where any disappointment in earnings or future guidance could trigger significant share price volatility, said Hong Leong Investment Bank (HLIB) Research.
"We expect Malaysian tech companies to deliver a decent 3Q2025 earnings season, supported by seasonality and the absence of chip tariffs thus far.
"That said, sector valuations have already rerated sharply (KLTEC +63% since April lows), leaving little room for error and placing stricter scrutiny on both earnings delivery and guidance this time around," said the research house in a note Wednesday.
Investors, while encouraged by the positive seasonality and firm sentiment around the artificial intelligence theme, are demanding concrete proof that the rally is justified, it noted.
"In our view, any earnings or guidance disappointment could trigger significant share price volatility, with even stricter scrutiny compared to 2Q2025."
HLIB said while there is unlikely to be explicit guidance on tariff impact, commentary from key end-markets such as automotive, industrial, and consumer may offer some early signs since the US reciprocal tariffs came into effect in August.
Looming in the background is the persistent risk of the Section 232 tariff review, a key event that could reset sector sentiment as investors look ahead to 2026, it said.
Given the combination of elevated expectations and these tangible risks, HLIB maintained its neutral stance on the sector for now. The upcoming earnings season is seen as a critical litmus test, and a clearer investment direction will be established after these results are assessed, it said.