Media365
Global investors should shift their focus from Asia’s dominant AI hardware “titans” to a growing group of mid-cap “battleground” sectors that offer stronger growth potential amid intensifying competition, according to BofA Securities.
In a report, analysts from the Bank of America investment banking arm mapped more than 330 Asian stocks across 22 subsectors in the artificial intelligence technology layer – representing market capitalisation of nearly US$6 trillion. The most compelling opportunities in the region were in a growing group of under-covered “battleground” sectors that had more mid-cap stocks and relatively high profitability, BofA said.
Semiconductor fabrication and memory chips were the two largest sectors by market cap and formed “the core holdings”, said analysts led by Winnie Wu, head of Asia-Pacific equity strategy and co-head of China equity research at BofA Global Research, in the report published on December 4. “But we advise investors to seek alpha in the ‘battleground sectors’ with more mid-cap stocks.”
The bank defined these battleground sectors as those with many mid and small-cap stocks, where rising stars, under-covered companies and pair-trading opportunities were more abundant.
The top five battleground sectors with relatively high profitability were semiconductor equipment, printed circuit board/copper clad laminate (PCB/CCL), optical module/co-packed optics (CPO), microprocessor unit/system on chip and outsourced semiconductor assembly and testing, according to the bank.
Semiconductor equipment alone included more than 50 stocks in Asia with a combined market cap close to US$500 billion, benefiting from aggressive capital expenditure by advanced chip fabs, according to the report.
