Dialing Up Asia’s Surprise Stock Winners

The global smartphone market has seen better days, yet the industry underpins the hottest stocks in Asia’s best-performing sector this year.

The MSCI Asia Pacific Infotech index is up almost 16 percent in 2017, outgunning the runner up (industrials) by just shy of 7 percentage points.

And leading that sub-index, in dollar terms, are smartphone suppliers. What’s interesting is that these outperformers are neither brand names nor assemblers, but makers of the specialized components that go into each device.

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Leading Asia’s strongest sector this year have been smartphone component suppliers

Source: Bloomberg

Sunny Optical Technology Group Co. and  LG Innotek Co. are up more than 68 percent apiece. I wrote about Sunny two weeks ago, and it’s added another 7 percent since then. What that Chinese company and South Korea’s LG Innotek have in common are their supplies of dual-lens cameras for smartphones. Innotek, part of the LG chaebol, is expected to supply such parts to Apple Inc.’s iPhone 8, according to analysts.

Joining the Korean charge, two Samsung group members — Samsung Electro-Mechanics Co. and Samsung SDI Co. — are also at the top of the class. Both took a hit in 2016 because of the Note 7 battery crisis and now are back in investors’ good books. The former not only makes camera and communications modules, but supplies capacitors — which can number more than 700 per smartphone. SDI is a battery maker, and despite last year’s debacle remains a crucial part of the supply chain.

Then there’s AAC Technologies Holdings Inc. and Catcher Technology Co. If you had to pick one standout winner from the smartphone era it would be China’s AAC, among the premier makers of speakers and microphones used in electronics devices. The stock is up more than 12-fold in the past decade and hit a new high in Hong Kong last week.

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