The announcement saw markets filled with euphoria over the de-escalation of the trade war with the S&P500 up 3.26% and the Hang Seng Index rising close to 3% on May 12.
One sector in particular that has shown resilient recovery since the Liberation Day lows on Apr 7 has been the technology sector. According to a DBS report on May 12, Asian technology stocks under their coverage have rebounded meaningfully since April, with some gaining nearly 40%.
Technology stocks are particularly vulnerable to US-China tariffs due to their deep integration within the global supply chain and significant exposure to cross-border manufacturing and sales. Hence, it was no surprise that some of the biggest gainers after US-China tariffs were lifted were technology stocks but DBS highlights that investors should still be wary of potential semiconductor tariffs to come.
“Tariffs on semiconductors, electronics and related equipment increase production costs and disrupt procurement, compressing margins and delaying product launches. Conversely, Chinese tech firms face restricted access to US technologies, curbing their ability to innovate and meet demand,” says DBS.
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Still, the technology sector has historically proven to be resilient on the back of de-escalation of trade tensions and rebounded the most at the end of the previous trade war between US and China back in 2018.
Hence, the tech sector will still remain favoured going into the next few months.
Among Singapore-listed companies, those favoured by DBS are equipment manufacturing and engineer service provider, UMS Integration; manufacturing solutions service provider, Grand Venture Technology and technology solutions provider, Frencken Group.
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UMS Integration’s significant production ramp up and robust new product introductions have helped improve the company’s outlook. Steady contributions from existing key accounts including contributing output from their new Tampines facility have helped too.
Grand Venture Tech meanwhile has high-growth potential with blue-chip clients and DBS cites its front-end semiconductor projects as key growth drivers, with notable revenue increases expected in FY25 and stronger contributions in FY26 coming off a low base in FY24.
Frencken Group meanwhile is poised for long-term gains with global expansion within Singapore and in the US and has exposure to high-growth sectors such as artificial intelligence (AI), robotics and advanced manufacturing.
DBS reiterates its ‘buy’ calls on the three stocks respectively, with a target price on UMS of $1.31; Grand Venture Tech of $1.12 and a target price on Frencken Group of $1.48.
For Hong Kong listed names, DBS retains their ‘buy’ calls on Xiaomi and BYD Electronics on the back of a pivoting market focus to structural growth drivers such as AI adoption and the growing demand for sensors, driven by developments in humanoid robotics.
“Xiaomi and BYD Electronics are well-positioned to ride these megatrends, underpinned by Xiaomi’s progress in large language models (LLMs) and both companies’ strong capabilities in precision manufacturing, especially within the EV ecosystem,” DBS writes.
DBS’ target prices for Xiaomi and BYD Electronics remain at HK$80 ($13.38) and HK$57 respectively.
