UBS Analyst Warns: Semiconductor Sector May Have Peaked

BlockBeats News, June 29th, Morgan Stanley's Mike Wilson-led strategy team pointed out that investors need to significantly increase their stock selection criteria during this round of adjustment. Wilson stated that there is still room for the market to continue to broaden, with the core driver being "the market severely underestimating the extent of the overall market earnings recovery." Against the backdrop of falling oil prices and the high likelihood that the Fed's policy stance is less hawkish than currently priced in by the market, he is bullish on the consumer discretionary, transportation, and regional bank sectors.

Another key concern of Wilson's is the recent intense volatility in the semiconductor sector, making it much more difficult for the market to maintain historically high positioning. The Philadelphia Semiconductor Index (SOX) has been highly volatile: during the week of June 15th, the index surged by 7.3%, only to plummet by 7.9% last week.

He also presented a set of analogies that should put bulls on alert: semiconductors may become another category to complete a round of skyrocketing this year, with a trend logic similar to the silver sector, except that the semiconductor sector lags silver by four months. "If the market's broadening trend is sustainable, then the current price momentum in the semiconductor sector is likely to reach a temporary peak. From the pace of the market, this turning point seems to be occurring as expected. This does not mean that the semiconductor industry cycle is coming to an end, but the lack of upward momentum in this sector in the short term will leave room for excess returns in other market sectors; consumer discretionary, transportation, and other sectors will experience a period of strength based on their relative positive outlook."