CIMB analyst Shanaz Noor Azam said in a report that the sector has entered a new upcycle with a potential for valuation re-rating.

“We expect to see a stronger utilisation pick-up, especially from the second half of 2024 (H2 2024) onwards.

“Accelerating supply chain diversification and supportive government policies will also boost earnings,” he added.

Shanaz said there is more upside in the sector, given that the Bursa Malaysia Technology Index peaked at 57 times 12-month forward earnings “during the last upcycle”.

“The gauge, having notched five straight months of gains through June, the longest such streak since 2021, is currently trading below 30 times,” he said.

CIMB said it prefers outsourced semiconductor assembly and test providers, with Inari Amertron Bhd and Malaysian Pacific Industries Bhd as favored picks for exposure to the sector.

The tech stock index dropped as much as 0.6% today but remained on track for a weekly gain.