Malaysian tech stocks expected to face sentiment pressure amid data center concerns

Traders Union
All News
Stocks
Malaysian technology stock pressure

Highlights

Kenanga Investment Bank sees post-U.S. election sentiment pressure weighing on Malaysian technology stocks, with valuation declines expected to exceed the earnings impact.
YTL Power International Bhd is considered excessively discounted, as its RM5.01 closing price reflects only 600MW against a 1.2GW pipeline, while approved data center power capacity reached 12.3GW as of August.
MBSB maintained its end-2027 FBM KLCI target of 1,850 points, based on forecast index earnings of 120.1 points, growth of 6.6% and a forward P/E of 15.4 times.

This article was translated from the original. Read the original version by our correspondent here.

Analysts’ outlook for the technology sector

The Edge Malaysia reported that MBSB Research believes a blanket negative view of Malaysia’s technology sector is unwarranted, as the impact varies depending on each company’s exposure, including to AI servers, data center equipment, semiconductor testing, consumer electronics, capital equipment orders, customer concentration and balance sheet strength.

In a note on Tuesday, MBSB said tighter regulations do not eliminate the physical requirements of AI, which still needs electricity supply, grid connections, buildings, cooling systems, water treatment, fiber networks, cybersecurity and backup power. The firm stressed that U.S. policy risks would first translate into valuation risks in Malaysia before becoming earnings risks.

Kenanga Investment Bank said post-U.S. midterm election concerns were weighing on Malaysian technology stocks in terms of sentiment, and expected the deterioration in sentiment and valuations to be more pronounced than the impact on earnings, despite delays in data center implementation. The investment bank sees any shift in data center development outside the U.S., including the possibility of overseas expansion by Meta, as a moderate positive for Malaysia, as it could extend the visibility of the local data center theme rather than accelerate demand.

Kenanga also highlighted Google’s commitment to spend US$15 billion in Malaysia in 2027 and 2028. Among technology stocks, the firm remains positive on Nationgate Holdings Bhd and Ambest Group, and favors Kelington Group Bhd given its secured revenue for 2027 and 2028, but sees no immediate need for broad-based bargain hunting in the sector.

Implications for data centers and the Malaysian market

MBSB favors more resilient exposure to the physical infrastructure surrounding data centers, including Tenaga Nasional Bhd, YTL Power International Bhd, Gamuda, Sunway Construction Group Bhd, IJM Corporation, CelcomDigi Bhd and Maxis Bhd. Kenanga said local constraints are tightening, with 24 approval applications still on hold pending reviews of power and water supply.

According to Kenanga, 12.3GW of power capacity had been approved for data centers as of August, while the sector’s peak demand is projected to reach 8.39GW by 2030. The firm considers YTL Power and several property stocks excessively discounted relative to their data center prospects, noting that YTL Power’s last closing price of RM5.01 implied recognition of only around 600MW of its pipeline, compared with its 1.2GW outlook.

Data center valuations also account for 7% to 14% of the target prices for Sime Darby Property Bhd, EcoWorld Development Group Bhd and Mah Sing Group Bhd. Kenanga also likes Tenaga Nasional, considering the discount implied by skepticism about the IBR mechanism excessive. It also sees Kee Ming Group Bhd benefiting from data center-related electrical work, while Sunway Construction is its pure-play data center pick.

Both research firms expect Malaysian equities to remain supported by resilient domestic growth, healthy corporate earnings and continued investment in infrastructure and data centers. MBSB maintained its initial end-2027 FBM KLCI target of 1,850 points, based on forecast index earnings of 120.1 points, growth of 6.6% and a forward P/E of 15.4 times, while noting that lower oil prices would provide the market confirmation needed for that target.

In earlier coverage, we reported that 27 data center projects worth RM225.97 billion had been approved through July 2026 by the data center task force.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.