We see increasing polarisation within the Asia technology sub-sectors and classify stocks either Bullish or Bearish. We are Bullish on select end-products (ie, smartphones, tablet PCs) and Bearish on desktop PCs and feature phones.
We are Neutral on LCD-TVs (including LED-TVs) owing to severe oversupply and much weaker-than-expected demand. The solar industry (Bearish) appears to be entering oversupply in 2011 with reduced policy subsidies. We are Neutral on IT services & software amid expectations of moderating revenue growth in 2012F, increased supply-side risks, limited operational scope and increased taxation.
Top BUYs: SEC, HTC and TPK. Meanwhile, we are cautious on names with weak growth prospects, PC-related components, feature phone-related components and LCD and LED-related components, including MediaTek, Taiwan DRAM names and Seoul Semi (all REDUCE).
Irrespective of industry trends, we like PC player, Acer, for its cost control and customer mix. We also like HCL Tech in IT services & software for its competitive positioning vs MNC vendors, operational scope and earnings growth potential.
