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Semiconductor Stocks May See More Volatility, BNP Paribas Says

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Bloomberg Jul 25, 2024 01:05 · 17.8k Views

BNP Paribas Head of APAC Equity and Derivative Strategy Jason Lui says there might be more volatility in the semiconductor sector "given how crowded those positions have been" in Asia and globally. Lui speaks on Bloomberg Television.

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Transcript

  • 00:00 Seems like,
  • 00:01 you know, what we're seeing out of this tech rotation is, is really becoming more fierce and pronounced now.
  • 00:05 How much more downside do you think we could see?
  • 00:08 I think at this point you're right that we've seen a very dramatic position rotation and it all started back in the CPI print couple weeks ago where the overall interest rate expectation in the US has changed dramatically.
  • 00:19 Because previously I think the tax and semiconductor in particular has been this kind of core position for a lot of people because of that interest rate situation.
  • 00:27 And now all of a sudden, when you have a rapid shift
  • 00:29 in the macro sentiment,
  • 00:31 a lot of these popular position has to be unwound.
  • 00:33 So I think
  • 00:34 until we see some confirmation from some of the heavy semiconductor bellwetters, perhaps there's still a little bit more volatility given how crowded those position has been.
  • 00:43 And as you pointed out earlier, we've seen some of that happening
  • 00:46 in Asia as well.
  • 00:47 So we may have to wait until Taiwan reopen after the typhoon to have a full assessment on the broader semiconductor sentiment in the region.
  • 00:54 So, so the advice would be if I'm tempted to buy this dip, whether that's in Asia or in the US later today,
  • 01:00 don't do it.
  • 01:01 I think at this point, we may need to see a little bit more of that positioning unwind before you can establish the bottom, given how crowded some of those semiconductor position has been, not just for Asia, but globally as a whole.
  • 01:13 China seems to be
  • 01:14 trapped in a down cycle as well.
  • 01:15 I mean, anytime we see some sort of rebound only last
  • 01:18 a couple of weeks as well.
  • 01:19 What's still needed to avoid the sort of downward spiral that we're seeing now?
  • 01:23 Sure.
  • 01:23 I think there are two parts to that question
  • 01:26 on the index level and on the thematic level.
  • 01:28 You are correct that when it comes to the index level, we have been experiencing this super concentrated, super volatile
  • 01:34 roller coaster rifle quite a few times this year already.
  • 01:37 The main cause is because those rallies are all driven by valuation of the hope that you will see more stimulus measures.
  • 01:44 But over the past six months, the earnings estimate has continued to be revised down, which means that these kind of rally
  • 01:50 must be supported eventually by fundamentals and yet we haven't seen that coming through.
  • 01:54 So that's why at some point investor ran out of patient and say I haven't seen any improvement in earnings, therefore I need to get out of that index position.
  • 02:01 On the sector level, we continue to see very wide divergent
  • 02:05 when it comes to sectors actually benefiting from the global trend versus the sectors that are suffering from some of the consumption depression
  • 02:11 in the market.
  • 02:12 So I think for a stock picker market, it's actually still quite appealing for them.