&ldquo The stock market cycle is forward looking and tends to lead the economic cycle. Technology stocks typically outperform in the early stages of the bull market due to the lower interest rate environment, as we had seen last year,&rdquo it adds.

  Furthermore, the team sees the recent structural trends driving technology. These include 5G enabling new technological applications while new generations of mobile networks are driving smartphone sales and semiconductor shipments.

  Telecommuting also looks set to stay in a post-Covid-19 world.

 

  &ldquo More advanced semiconductor chips are required to drive vehicles, especially with the rising popularity of electric vehicles and autonomous driving,&rdquo says the team.

  The recent chip shortage should also be seen as a positive development for counters in the sector as it re-emphasises the importance of semiconductor chips and &ldquo our vision of a secular uptrend&rdquo .

  Though the FTSE Technology Index has underperformed the Straits Times Index (STI) y-t-d &ndash which saw a divergence at end-February due to rising yields and the shift to value stocks &ndash the analysts say the outperformance of value stocks does not necessarily mean that investors are forsaking growth stocks.

  To them, this represents &ldquo a broadening appetite for equities and diversification when

  fixed income yields are likely to stay low even as they rise modestly in a post-pandemic economic recovery&rdquo .

  &ldquo Our interest rate strategist&rsquo s current view is for US 10-year yield to reach 1.75% in 2021 (y-t-d high 1.6%), while near-term yield is expected to be in the 1.3-1.5% range,&rdquo writes the team.

  To add, the team says Singapore tech is the cheapest in the Asean region.

  &ldquo At merely 12.8 times price-to-earnings (P/E), the current Singapore tech sector is much cheaper than the 28.6 times for Malaysia and 42 times for Thailand,&rdquo it writes.

Amongst the Singapore counters, the team likes Venture Corporation (VMS) and Nanofilm Technologies &ldquo for their differentiating capabilities in technologies&rdquo .

The brokerage has given VMS and Nanofilm &ldquo buy&rdquo recommendations with target prices of $24.30 and $6.22 respectively.

Semiconductor stock picks are: AEM Holdings, UMS Holdings and Frencken with &ldquo buy&rdquo calls and target prices of $5.36, $1.57 and $1.55 respectively.

As at 4.48pm, shares in VMS and Nanofilm are trading at $19.88 and $4.97 respectively, while shares in AEM, UMS and Frencken are trading at $3.91, $1.26 and $1.45.

 

 

 

 

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Of course, in some nations, smoking is actually on the rise. And in others, reduced-risk products have slowed or even reversed declines for tobacco companies. &ldquo It is too early to say if this will fully rescue the industry long term,&rdquo Spielman notes. &ldquo It also makes the public health story more complicated.&rdquo

All this may sound like bad news for tobacco stocks, but Spielman argues that in fact the shares look undervalued now, with valuations seeming in many cases to reflect a worst-case scenario in which the entire business disappears in less than 30 years. Yet in reality, varying trends around the world and the rise of reduced-risk products offer some insulation.

By contrast, he downgraded  Altria  (MO) to Neutral from Buy, with a $46 price target. He writes that the company &ldquo comes out worst&rdquo from his research, as 82% of its exposure is to the U.S. cigarette market, which could conceivably disappear in three decades if patterns hold.

Altria has its own reduced-risk portfolio, but Spielman warns that the company&rsquo s market share in this category is as much as 20% below its market share in traditional tobacco. That means that as alternative products take more of the market, Altria will lose share.

Philip Morris is up 0.3%, at $87.95, in recent trading the shares are up 6.2% year to date. Altria is down 0.6%, at $49.53, although it has risen 21% in 2021. The  S& P 500  is up 0.2% in recent trading.

https://www.barrons.com/articles/as-smokers-keep-quitting-philip-morris-keeps-looking-better-51615908952