Credit Suisse says sell-off presents buying opportunity in these Asian tech stocks

  • Both multinational and local companies have been affected by the extended shutdown in China, with factories unable to return to full production.
  • Amid the turmoil, Credit Suisse highlighted five Asian tech stocks that have dived from their year-to-date highs, and predicted their potential upside.
  • Downloads and views of online games, fitness apps and live-streaming platforms have all surged, according to reports.

The spread of the coronavirus outbreak has roiled markets in Asia and elsewhere, and hit supply chains globally.

Both multinational and local companies have been affected by the extended shutdown in China, with factories unable to return to full production.

Last week, Apple warned that it does not expect to meet its quarterly revenue forecast due to lower iPhone supply globally and lower Chinese demand. Apple makes most iPhones and other products in China, and the outbreak had caused it to temporarily halt production and close retail stores in China.

That led to a sell-off among Apple suppliers in Asia last week.

Amid the turmoil, Credit Suisse highlighted five Asian tech stocks that have dived from their year-to-date highs, and predicted their potential upside. The investment bank rated all five stocks as “outperform.”

1. Taiwan-listed Hon Hai Precision Industry, better known as Foxconn, and Apple’s largest manufacturer

Decline from year-to-date high: -12.13%
Upside: 22%

2. Hong Kong-listed Sunny Optical, also an Apple supplier

Decline from year-to-date high: -12.21%
Upside: 21%

3. Taiwan-listed chip supplier Mediatek

Decline from year-to-date high: -15.06%
Upside: 20%

4. Taiwan-listed ASE Technology, a top chip test and packaging company

Decline from year-to-date high: -12.07%
Upside: 12%

5. Taiwan-listed electronics manufacturer Delta Electronics

Decline from year-to-date high: -6.88%
Upside: 13%.

*Based on Feb. 27 market close

More people staying home — under quarantine orders or just to avoid going out — has boosted online entertainment. Downloads and views of online games, fitness apps and live-streaming platforms have all surged, according to reports.

“E-commerce would further gain market share from offline driven by the dramatic reduction in consumers’ outdoor activities. WFH (work from home), remote service and other flexible arrangements ensure little impact on products and service provided, with only logistics as a hurdle in the short term,” Credit Suisse wrote in a report last week. “Live streaming and on-line entertainment are gaining good momentum, if (the) right (content is) provided.”

With schools shut, online education could be a good bet too, says the investment bank.

“Online education such as K-12 has become a must when schools are closed and also offer lower tier users to get access to best-in-class teachers in tier 1 cities,” it said. Tier 1 cities in China refers to cities such as Beijing and Shanghai, while K-12 refers to education from kindergarten to grade 12.

Credit Suisse picked out three such stocks that investors can play on.

1. New York-listed New Oriental Education, an online education provider in China

Decline from year-to-date high: -6:44%
Upside: 21%

2. New York-listed Huya, one of the biggest live-streaming game platforms in China

Decline from year-to-date high: -11.73%
Upside: 47%

3. New York-listed Alibaba, Chinese e-commerce giant

Decline from year-to-date high: -11.04%
Upside: 34%

*Based on Feb. 27 market close

Source: https://www.cnbc.com/2020/02/28/credit-suisse-asian-tech-stocks-to-consider-amid-sell-off.html

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