OCBC Report - 05 Dec 2007

Technology Sector: Volatile 2008 but offers value propositions

Summary: Technology stocks in 2008 are unlikely to be immune from the ongoing turmoil in the global equity markets. But considering that most did not actually enjoy any of the heady rises in 2007, the potential downside risk is actually lower. No doubt the overall consumer spending in the US is widely expected to slow down in 2008, but the level of spending on electronic gadgets may turn out to be fairly resilient. We remain most positive on the HDD (Hard Disk Drive) sector, where we think demand will be driven by the proliferation of digital media files, both in number as well as size. However, we are not as positive on the semiconductor sector, but we believe service providers like Micro-Mechanics should still do relatively well. And to capitalize on China's still-strong electronic boom, we would recommend component distributors like Karin Technology, WesTech and Willas-Array, and capital equipment maker Bright World Precision Machinery. Separately, we also see Silverlake Axis Limited as a potential beneficiary of China's move to upgrade its financial system. We continue to like Venture Corp and believe that its strong management and diversification into industrial and medical devices should allow it ride out the storm relatively intact. (Carey Wong)

For more information on the above, visit www.ocbcresearch.com for the detailed report.

NEWS HEADLINES

• CapitaLand Limited could double the number of homes it is constructing in Vietnam to about 6,000 units in the next three years and expand beyond its residential businesses there to include offices, retail, and integrated leisure, entertainment and conventions developments. Additionally, it is exploring the creation of a development fund worth US$300m to invest in properties there.
• Goodpack Limited aims to grow by developing its presence in new and existing markets, expanding its stock of intermediate bulk containers to 2.5m by 2010 and boosting its market share in the synthetic rubber sector.
• Osim International Ltd is strengthening its presence in the South Korean market by partnering with LG International Corporation to market and sell its healthy lifestyle products at LG's stores.
• Best Way International Ltd will pay S$3.9m to acquire a 51% stake in Nanjing Joymain Sci and Tech Development Co - a Chinese direct-selling business to strengthen its foothold in the Chinese direct-selling market for health and lifestyle products.
• Startech Electronics Ltd is proposing a rights issue of warrants to raise net proceeds of between S$3.8m and S$4.99m to finance the expansion of its fashion business in China.
• Singapore Telecommunications Ltd and Singapore Exchange Limited have launched a high-speed service for financial institutions with direct connectivity to SGX derivatives and data platforms.