KUALA LUMPUR: Technology and energy stocks on Bursa Malaysia have fallen to multi-month lows today.
The energy index dropped 2.84 per cent, falling 24.43 points to 835.18, while the technology index declined 2.14 per cent, losing 1.26 points to 57.73, its lowest level so far this year.
Tradeview Capital fund manager Neoh Jia Man attributed the decline to the unwinding of previous over-optimism around artificial intelligence (AI), reflecting the retreat in US. tech stocks.
He added that the recent strength of the ringgit was not a significant factor in the correction of local tech valuations.
"Additionally, the disappointing earnings results and weak forward guidance from local tech firms have contributed to the sector's underperformance.
"We have maintained a cautious stance on the technology sector since the beginning of the year, as we believe its valuations are not supported by underlying fundamentals," he told Business Times.
Although there is an influx of data centres, Neoh does not expect it to have a major effect on the bottom lines of local tech companies.
"Moreover, we anticipate the technology sector will continue to face headwinds from demand softness across most end markets, with the exception of AI-related segments," he added.
In a separate note, Neoh explained that the recent bearish sentiment on oil prices is largely due to worries about a possible economic slowdown in the US, coupled with continued weakness in China's economy.
He also mentioned that local oil and gas stocks have been further affected by uncertainties surrounding unresolved issues between Petroliam Nasional Bhd (Petronas) and Petroleum Sarawak Bhd (Petros), raising concerns about a potential reduction in Petronas' capital expenditures.
"As a result, despite posting robust earnings in the latest quarter, energy stocks on Bursa Malaysia have nearly wiped out their year-to-date gains," said Neoh.
However, he believes the market's response may have been somewhat excessive.
"Local oil and gas stocks could find some support from two potential catalysts: an expected rate cut by the US Federal Reserve and the anticipated awarding of multi-year contracts by Petronas in the coming months," he added.