The technology industry is one of the best-performing markets in Asia next year, according to a new report by Macquarie Group, a provider of investment and diversified financial services.
In a section of the Outlook 2009 report co-authored by Asia strategists Tim Rocks and Daniel McCormack, Macquarie said the most outstanding sectors--from a stock market point of view--in the Asia-Pacific region for 2009 would be technology and property.
The analysts noted also, that Korean, Taiwanese and Thai markets are expected to be the best-performing in the region.
At the country level, Macquarie noted about half of the Asian economies--Hong Kong, Japan, Korea, Singapore and Taiwan--will be in recession in 2009, with Hong Kong being the hardest hit. Markets that are forecast to grow include China, the strongest economy at 7 percent GDP growth, India, Indonesia, the Philippines and Thailand. Malaysia is projected to have the lowest GDP growth, at 1 percent.
According to the company, the first quarter will be an ominous reporting period, but the market will stabilize in the second quarter. Partial recovery is expected in the third quarter, however, the economic recovery will fade in fourth quarter giving way to a fuller recovery in 2010.
The tech sector, said the report, will face challenges not only due to the "deteriorating macro and micro environment" but also inventory adjustments across the supply chain. Segments such as semiconductors will be affected by excess inventory, particularly in the handset and consumer markets. "We expect the ongoing inventory de-stocking will hurt margins in the next few quarters as the market adopts a cautious inventory management policy," Rocks pointed out.
Rocks and McCormack added companies that are able to "survive the disruptions of the next couple of years" would gain market share, even though they may not currently be in a strong financial situation. "We identify the most likely winners in the next upturn for their competitive strength, based on: technological leadership, unparalleled cost structure and new product cycle," the analysts said.
The "diamonds in the rough" identified by Macquarie include China Mobile, India's Infosys, Korea's Samsung Electronics and Taiwan's HTC.
According to Macquarie, China Mobile has a dominant position in rural areas and strong parent backing. It also pointed out that in the area of TD-SCDMA, a home-grown 3G technology the Chinese government is determined to succeed, the telco is working with Nokia to develop dual-mode handsets.
Infosys, the report pointed out, is well-positioned to gain from the need for companies to improve competitiveness by "outsourcing technology and operations functions to specialists", particularly in the current economic climate.
Korea is a market that has traditionally risen the most during economic recovery periods, said the report. Samsung, being the lowest cost producer of DRAM, can leverage its strong balance sheet to keep growing market share and also gains from the depreciation of the Korean won against the Japanese yen, noted Rocks. "The weaker won should help the company lower costs and thus undercut prices to garner further market share, especially in the memory and LCD industries."
As for HTC, Macquarie pointed out that the phone maker has the "widest and longest" relationships with telcos, which should help it continue to gain market foothold in Windows Mobile systems. The smartphone player's introduction of two to three new Google Android models in 2009 will further increase its market share.